On Wednesday, Baird adjusted its price target for Polaris Industries (NYSE:PII) shares, a company known for manufacturing off-road vehicles, to $95 from the previous $100 while keeping an Outperform rating on the stock.
The revision follows insights gathered from a survey of 40 dealers, which revealed a mixed retail environment. The Ranger model has been performing well, providing a positive note amidst softer sales in other segments such as RZR, ATV, and marine, which are more sensitive to financing terms.
Dealers expressed growing concerns over the costs of maintaining inventory, a sentiment that has been acknowledged by Polaris Industries itself. The company had already announced plans to reduce inventory levels throughout the year.
However, feedback from dealers indicates a desire for more significant reductions in inventory than initially planned by the company. In response to these findings, Baird has adjusted its earnings estimates for Polaris to fall below the company's own guidance.
The firm recognizes the value in Polaris shares, which are currently trading at approximately 11 times Baird's earnings per share (EPS) estimate. Despite this perceived value, the firm notes that many investors are still cautious, preferring to wait for further inventory adjustments before committing to the stock.
Polaris is scheduled to report its second-quarter earnings on July 23, 2024, which will provide further insights into the company's financial performance and inventory management progress.
In other recent news, Polaris Industries has been the subject of various analyst notes. DA Davidson downgraded the company's price target to $75 due to a persistent slump in North American off-road vehicle retail sales.
Despite this, the firm expects Polaris to report second-quarter earnings above consensus, projecting an EPS of $2.42. However, concerns were raised about potential lowering of its full-year 2024 EPS guidance in light of current market trends.
KeyBanc Capital Markets maintained an Overweight rating on Polaris with a $105 price target, citing confidence in the company's direction and ongoing operational improvements.
The firm also highlighted the potential for additional savings beyond the fiscal year 2024. Polaris's focus on cost management and strong presence in the utility segment were noted as factors contributing to the stock's attractiveness.
Baird retained its Outperform rating on Polaris but reduced the stock price target to $100. The adjustment was attributed to ongoing concerns over inventory levels despite the company surpassing expectations and confirming its existing guidance. Meanwhile, BMO Capital maintained its Market Perform rating on Polaris with a steady price target of $95.
Recent developments also indicate a slump in farm equipment sales, affecting major manufacturers like Polaris. Dealers are resorting to discounting machines and halting new orders to manage excess inventory. These circumstances are impacting profits across the sector.
InvestingPro Insights
As Baird revises its outlook on Polaris Industries (NYSE:PII), real-time data from InvestingPro provides additional context for investors considering the stock. With a market capitalization of $4.29 billion and a P/E ratio standing at 10.99, Polaris presents as a potentially undervalued investment, particularly as it trades near its 52-week low. This valuation is in line with Baird's assessment of the stock trading at approximately 11 times its earnings per share estimate.
InvestingPro Tips highlight the company's track record of raising its dividend for 27 consecutive years, with a current dividend yield of 3.48%. This consistent return to shareholders is a testament to the company's financial resilience, even as it faces a challenging retail environment. Additionally, Polaris has maintained dividend payments for 38 consecutive years, underscoring its commitment to shareholder value. With analysts predicting profitability for the year and a solid performance over the last twelve months, these factors may offer some reassurance amidst the stock's recent price volatility.
For investors seeking a deeper analysis, InvestingPro offers more tips on Polaris Industries, which can be accessed at https://www.investing.com/pro/PII. Those interested in a yearly Pro or a yearly or biyearly Pro+ subscription can use the coupon code PRONEWS24 to receive up to 10% off.
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