Polaris Inc. (PII) shares took a dive on Tuesday after the company’s third-quarter earnings report failed to impress investors. The results fell short of analyst expectations, sending a wave of disappointment through the market.
The company reported adjusted earnings per share of 73 cents for the quarter, missing the consensus estimate of 88 cents. Revenue also came in below expectations, clocking in at $1.72 billion, a 23% year-over-year decline and missing the street view of $1.77 billion.
The decline in sales was attributed to a combination of factors, including lower volume, unfavorable product mix, and increased promotional activity. This resulted in a significant drop in adjusted gross profit margin, which fell 184 basis points year-over-year to 20.8%.
Adding to the woes, adjusted EBITDA margin contracted by a significant 333 basis points year over year to 9.2%. Market share for off-road vehicles (ORV), motorcycles, and pontoons also declined modestly during the quarter.
The overall weakness in the powersports sector was evident in retail sales, which dropped by 7% compared to last year. This decline was driven primarily by decreases in ORV, motorcycles, and marine sales, with ORV retail experiencing a 3% drop.
Challenging Outlook
Given the challenging market conditions, Polaris CEO Mike Speetzen cautioned about the outlook for the remainder of 2024 and into next year. “We expect a challenging retail environment throughout the rest of 2024 and into next year,” he stated.
Reflecting this cautious outlook, Polaris has revised its 2024 sales guidance downward to a decline of about 20% compared to 2023, up from the previous estimate of a 17% to 20% decrease. The company also expects adjusted diluted EPS to fall by approximately 65% relative to 2023, compared to the earlier forecast of a 56% to 62% decline.
Price Action
PII shares were trading lower by 5.16% to $76.06 at last check on Tuesday. The stock’s decline reflects investor concern about the company’s performance and its outlook for the future.
Polaris’s disappointing earnings report and revised outlook underscore the challenges facing the powersports industry. As consumer spending patterns shift and economic headwinds persist, companies like Polaris will need to navigate a difficult landscape to achieve success. Investors will be watching closely to see how the company responds to these challenges and whether it can regain its footing in the coming quarters.