Polaris Sinks as Retail ORV Demand Dries Up, Citi Says in Downgrade

By Investing.com Staff

Shares of Polaris (NYSE:) fell nearly 6% Wednesday after Citi analysts downgraded the stock to Neutral from Buy after checks showed a “disappointing” retail environment for the off-road vehicle (ORV) maker. The firm’s price target is now $101 versus $131.

“Our checks suggest a retail environment substantially worse than previously anticipated, and while the near-term earnings impact is likely muted, this condenses (if not altogether eliminates) the inventory replenishment opportunity for ‘23,” the analysts commented.

The firm estimates that the company’s North American ORV retail sales were down mid-single digits year-over-year in the quarter. While this was better than the second quarter, it is down 20% versus 2019. “… this falls far short of what we were anticipating and what was implied by management’s outook,” they said. The analysts said the weakness appears related to overall weak ORV demand and share losses to Can-Am.

Highlighting a positive for the company, the analysts note dealer inventories have increased modestly over the course of the quarter as supply chains loosen. “While this is potentially a big margin boost for PII, we were hoping to see this benefit amplified by a substantial improvement in retail, which is yet to materialize,” the analysts added.

While third-quarter results will likely be fine due to improving wholesale and cost trends, the firm has slashed FY23 estimates. The firm cut ’23 EPS estimates by $2.00 to $9.56, and is now $1.44 below the Street.

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