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How Does Longbow View Polaris Industries?

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Price movement

Polaris Industries (PII) has a market cap of $4.6 billion. It fell 4.4% to close at $74.07 per share on October 4, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.5%, -11.8%, and -12.2%, respectively, on the same day.

PII is currently trading 2.5% below its 20-day moving average, 13.9% below its 50-day moving average, and 14.3% below its 200-day moving average.

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Related ETFs and peers

The VanEck Vectors Morningstar Wide Moat ETF (MOAT) invests 3.6% of its holdings in Polaris. The ETF tracks an equal-weighted index of 20 companies that Morningstar determines to have the highest fair value among firms with a sustainable competitive advantage. The YTD price movement of MOAT was 17.1% on October 4.

The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG) invests 0.84% of its holdings in Polaris. The ETF tracks a market cap–weighted index of growth companies culled from the S&P 400.

The market caps of Polaris’s competitors follow:

  • Textron (TXT): $10.6 billion
  • Harley-Davidson (HOG): $9.0 billion

Latest news on Polaris

Regarding Polaris Industries, TheStreet reported, “Longbow issued a bearish note on the company.” It added, “The firm said September dealer survey results continue to suggest off-road vehicle share losses for the Medina, MN-based company, the Fly reports.”

TheStreet continued, “Longbow noted that recent recalls have had significant damage to Polaris’s brand, prompting share loss and concerns about 2017 sales.” The report added, “The firm projects that higher promotional activity will weigh on margins as competition continue to rise with manufactures abroad that are launching less expensive, comparable models, the Fly noted.”

Longbow rated Polaris Industries as “underperform” and set the stock’s price target at $77.50 per share.

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Polaris Industries’s performance in 2Q16 

Polaris Industries (PII) reported 2Q16 sales of $1.13 billion, a rise of 0.58% from $1.12 billion in 2Q15. Sales for its Motorcycles and Global Adjacent Markets segments rose 23.3% and 14.2%, respectively. Sales of its Off-Road Vehicles and Snowmobiles segment fell 5.7% between 1Q15 and 1Q16.

The company’s gross profit margin and operating income fell 11.4% and 28.7%, respectively, between 1Q15 and 1Q16. Its net income and EPS (earnings per share) fell to $71.2 million and $1.09, respectively, in 2Q16 compared to $100.9 million and $1.49, respectively, in 2Q15.

Polaris Industries’s cash and cash equivalents rose 23.4%, and its inventories fell 2.3% between 1Q15 and 1Q16. Its current ratio fell to 1.2x, and its debt-to-equity ratio rose to 1.6x in 2Q16 compared to 1.6x and 1.4x, respectively, in 2Q15.

During 2Q16, PII repurchased and retired 652,000 shares of its common stock worth $58.9 million. On June 30, 2016, it had the authorization to repurchase up to 8.7 million additional shares.

Projections

Polaris Industries (PII) updated the following projections for fiscal 2016:

  • sales growth of mid-single-digit to high-single-digit percentages
  • EPS of $3.30–$3.80

Next, let’s take a look at G-III Apparel Group (GIII).

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