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Polaris Inc PII

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Morningstar’s Analysis

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Lifting Polaris’ Outlook on Robust Demand and Share Gain Expectations; Shares Modestly Overvalued

Jaime M. Katz, CFA Senior Equity Analyst

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.

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Company Profile

Business Description

Polaris designs and manufactures off-road vehicles, including all-terrain vehicles and side-by-side vehicles for recreational and utility purposes, snowmobiles, small vehicles, and on-road vehicles, including motorcycles and low-emission vehicles, along with the related replacement parts, garments, and accessories. The firm entered the aftermarket parts segment in 2016, tying up with Transamerican Auto Parts and then tapped into boats through the acquisition on Boat Holdings in 2018, offering exposure to new segments of the outdoor lifestyle market. Polaris products retailed through 2,250 dealers in North America and through 1,400 international dealers as well as 32 subsidiaries and 85 distributors in more than 120 countries outside North America at the end of 2019.

2100 Highway 55
Medina, MN, 55340
T +1 763 542-0500
Sector Consumer Cyclical
Industry Recreational Vehicles
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 15,000