Polaris Industries Inc. (NYSE: PII) announced record fourth-quarter 2017 results on Tuesday, highlighting accelerating demand for its side-by-side vehicles and "massive" outperformance by its Indian Motorcycle brand compared with the broader industry.
However, the market didn't react well after management also issued underwhelming guidance and a near-term sales warning following delays getting certain models into showrooms. So let's take a closer look at what drove Polaris last quarter, as well as what to expect from the company as it kicks off the new year.
Image source: Polaris.
Polaris Industries results: The raw numbers
| Metric | Q4 2017 | Q4 2016 | Year-Over-Year Growth |
|---|---|---|---|
| Sales | $1.431 billion | $1.218 billion | 17.5% |
| GAAP net income | $31.5 million | $62.6 million | (49.7%) |
| GAAP earnings per diluted share | $0.49 | $0.97 | (49.5%) |
Data source: Polaris Industries.
What happened with Polaris this quarter?
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On an adjusted (non-GAAP) basis -- which excludes costs related to the ongoing wind-down of Victory Motorcycles, the integration of Transamerican Auto Parts (TAP), and the impact of U.S. tax reform -- net income increased 25% year over year to $95 million, or $1.47 per share.
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International revenue climbed 18% year over year to $211 million, driven by growth in the low-20% range from the Europe, Middle East, and Africa region, high-single-digit growth from the Asia-Pacific region, and mid-teens percentage growth in Latin America.
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Parts, garments, and accessories revenue, excluding aftermarket segment sales, grew 8% year over year.
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Off-road vehicle (ORV) and snowmobile sales grew 13% year over year to $881 million, once again driven by improved side-by-side unit shipments.
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ORV whole-good sales grew 14%, helped by strength in both RZR and RANGER model shipments.
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Snowmobile whole-good sales increased 11% to $131 million, driven mostly by shipment timing.
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Motorcycle sales fell 2% to $103 million, primarily because of the absence of revenue from Victory Motorcycle, compared with last year's fourth quarter. Indian Motorcycles whole-good sales grew in the high-single-digit percentage range, and Slingshot sales more than doubled thanks to improved product availability.
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North American consumer retail demand for Indian Motorcycle and Slingshot collectively grew 30% year over year.
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Global adjacent market sales increased 19% to $117 million, including 24% growth in commercial/government/defense category sales on military orders and demand for Goupil light-utility products.
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Aftermarket sales grew 62% year over year to $218 million, primarily from the acquisition of TAP. TAP sales climbed 4% year over year on a pro forma basis.
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The company repurchased 13,000 shares for roughly $2 million, bringing full-year 2017 stock repurchases to 1,028,000 shares for $90 million. Polaris has 6.4 million shares remaining under its existing repurchase authorization.