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On Thursday, Polaris Industries (NYSE:PII) shares faced downward pressure amid a challenging market environment, with the stock now down over 58% from last year and trading near its 52-week low of $30.92. Analysts at Rayja provided insights early in the day, suggesting a soft performance in the company's first-quarter retail sales. According to InvestingPro analysis, the company appears undervalued at current levels, despite maintaining its impressive 28-year streak of dividend increases. According to a recent survey conducted by the firm, which included 20 Polaris off-road vehicle dealers across the United States, there is an indication that Polaris' North American retail sales have declined by a low double-digit percentage year over year, approximately 12%, in the first quarter of 2025.
The survey's findings point to a steeper decline compared to the 7% drop witnessed in the fourth quarter of 2024, despite being measured against a more favorable base period (-10% in 1Q compared to +7% in the previous year). The anticipated downturn also represents an 8% decrease compared to 2019 figures, which is somewhat less severe than the 11% decline reported in the fourth quarter on a similar basis.
The analysts noted that the sluggish retail performance appears to be largely driven by ongoing macroeconomic challenges and the uncertainty surrounding tariffs, which seem to be particularly affecting the market for value and recreational vehicles. Prospective buyers are feeling the pressure, leading to weaker sales for Polaris. The company's revenue declined by 19.3% in the last twelve months, though it maintains a solid gross profit margin of 21.5%.
Polaris Industries is expected to release its first-quarter results before the market opens on Tuesday, April 29, 2025. The data provided by Rayja ahead of this announcement has set a cautious tone for investors, as they await the official earnings report to confirm the trends indicated by the dealer survey. InvestingPro subscribers can access 8 additional key insights and a comprehensive Pro Research Report, which provides detailed analysis of Polaris's financial health and future prospects. The company's stock performance on Thursday reflects the concerns raised by the analysts regarding the headwinds faced by the off-road vehicle manufacturer, though its attractive 7.3% dividend yield may provide some support for income-focused investors.
In other recent news, Polaris Inc. has faced several notable developments. The company's financial outlook was revised to negative by Fitch Ratings, which maintained a 'BBB' rating on Polaris' senior unsecured notes. This revision reflects Polaris' underperformance against expectations due to a cyclical decline in the powersports industry, impacting key financial metrics such as EBITDA and free cash flow margins. Citi analysts have downgraded Polaris' stock from Neutral to Sell, citing concerns over market challenges and the impact of tariffs, significantly lowering the price target to $33. These tariffs, particularly those involving China, are seen as a substantial threat to Polaris' business model according to Citi's analysis. Meanwhile, RBC Capital maintained a Sector Perform rating for Polaris, with a steady price target of $54, acknowledging the challenging operational environment and the company's exposure to tariffs. Polaris is actively working to align its shipments with retail volumes and reduce promotional levels as dealer inventories approach optimal levels. Fitch anticipates Polaris' leverage to rise initially but expects it to decline below 2.0x by the end of 2027 as market conditions recover. These recent developments highlight the complex challenges Polaris faces in navigating the current economic landscape.
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