Analyst Note| Jaime M. Katz, CFA |
We plan to raise our $100 per share fair value estimate on wide-moat Polaris by a low-double-digit rate after incorporating its robust fourth-quarter 2020 performance and adjusting for a 2021 outlook that handily outpaces our prognosis. Polaris delivered fourth-quarter 2020 sales growth of 24% (to $2.2 billion) and adjusted EPS growth of 83% (to $3.34) thanks to solid consumer takeaway and well-controlled costs. In 2021, the firm expects sales of around $8 billion and adjusted EPS of $8.45-$8.75, well above our $7.1 billion sales and $7.58 EPS forecast, as the product lineup continues to cater to socially distant activity demand. However, we foresee 2021 as a tale of two halves, with robust demand and cost leverage persisting in the first part of the year, lapping weak first-half 2020 performance, with the second-half sales and profits beginning to normalize, cycling strong social distancing demand in the back part of 2020.