Polaris (PII) is one of many stocks to watch in the IBD 50 due to bullish fundamentals and technicals. Buyers were in Polaris stock again Monday after shares soared nearly 6% in heavy volume Friday. The bullish move qualified as a breakout from a flat base with a 129.10 buy point. The 5% buy zone went up to 135.55.
Leadership is broad in IBD’s leisure products group. Polaris has a Composite Rating of 90 from IBD Stock Checkup, ranking it N0. 8 in the group, behind other top stocks to watch like Vista Outdoors (VSTO) and Brunswick (BC).
Polaris makes off-road vehicles, snowmobiles, motorcycles and boats. Profit growth and sales growth have both ramped up for two straight quarters after earnings and sales declined in Q1 and Q2.
When Polaris reported Q4 results in late January, profit and sales growth accelerated nicely from Q3. Quarterly profit jumped 83% from the year-ago quarter to $3.34 a share, with sales up 24% to $2.16 billion.
Sales of off-road vehicles, motorcycles, and boats all jumped by 20% or more, while utility vehicles were up 18%. Off-road vehicles accounted for 68% of total sales, and rose 29% in the quarter as both ATVs and utility terrain vehicles saw strong demand.
Polaris also gave bullish guidance. The company forecast 2021 earnings of $8.45 to $8.75 per share, with revenue up 13% to 16% to $7.95 billion to $8.15 billion. Analysts were modeling earnings of $8.07 a share on revenue of $7.382 billion.
For Q1, the Zacks consensus estimate is for adjusted profit of $1.52 a share, up 591%, with sales up 31% to $1.84 billion.
Polaris also bumped its quarterly dividend to 63 cents a share, giving it an annualized yield of close to 2%.
Stocks To Watch: Polaris Targets EV Market
Morgan Stanley in January came out with a bullish note just ahead of Polaris’ Q4 report. Citing “underappreciated” revenue growth in an expanding adventure sports market, along with strong millennial demand, Morgan Stanley initiated coverage with an overweight rating and a 140 price target.
Polaris plans to offer an EV option within each of its core segments by 2025, moving away from combustion-based powersport vehicles. The segments include all terrain vehicles and utility terrain vehicles. They also include three-wheelers, snowmobiles and motorcycles.
Last week, Polaris announced plans to launch a full-size electric Ranger later this year. The Ranger is the first utility terrain vehicle (UTV) developed by Polaris through its partnership with Zero Motorcycles, which was announced in September. UTVs are built with plenty of storage space, and passengers can sit side by side. They’re used more for work than recreation.
Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight.
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