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Polaris Slides as Analyst Notes Lowered Gross Margins Estimate

Polaris' estimates for gross margins will 'get the most investor attention,' a KeyBanc analyst says.
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Polaris  (PII) - Get Polaris Inc. Report beat Wall Street's first-quarter expectations and boosted its full-year guidance, but analysts focused on the company's lowered gross margins estimate.

Shares of the company from Median, Minn., were down 3.35% to $140.07 on Tuesday.

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Polaris reported net income of $134 million, or $2.11 a share, compared with a net loss of $5 million, or 9 cents a share, a year ago. Adjusted earnings were $2.30 a share, surpassing the FactSet consensus of $1.59 a share.

Sales totaled $1.95 billion, up 39% from a year ago and ahead of the FactSet consensus of $1.86 billion.

"In what we expect to get the most investor attention today, gross margins for FY21 were lowered from 'up slightly' to down 60-90 bps, as 'logistics, commodities, rework costs increase,'" KeyBanc analyst Brett Andress said in a research note. 

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Polaris said that retail demand and industry tailwinds continued to be strong during the quarter "driving higher company performance as both new and existing customer growth accelerated across all segments and regions of the company."

Motorcycle sales, including parts, garments and accessories, or PG&A, increased 31% to $166 million. Off-road vehicles and snowmobiles sales totaled $1.23 billion, up 50% from a year ago.

Looking ahead, Polaris said it was increasing its full-year earnings guidance and now expects adjusted net income to be in the range of $9 to $9.25 a share. Analysts are calling for earnings of $8.88 a share.

The company said it expects sales now in the range of $8.3 billion to $8.5 billion, up 18% to 21%, while analysts are looking for sales of $8.1 billion.

"Despite pandemic-related supply chain constraints, logistical challenges, and North American weather-related disruptions, sales across our business grew double-digits as we leveraged our capabilities and scale as the industry leader in powersports to deliver for our customers and dealers," said Mike Speetzen, interim CEO, in a statement.

In November, the company said that its chairman and chief executive, Scott Wine, planned to leave at the end of this year to become the new CEO of CNH Industrial.