While tariffs provide an air of uncertainty for Polaris Industries, improving off-road vehicle sales and consumer confidence will help the OEM to capture more market share by yearend, according to a report that BMO Capital Markets provided to Powersports Finance.
In the first quarter, Polaris’s North American off-road retail sales declined 3% year over year due to bad weather, the OEM reported on its earnings call. As the weather has improved, so too have retail sales in the second quarter.
Off-road vehicle sales at the OEM are trending up at a low single-digit rate, with dealers citing growth during the spring buying season, according to BMO’s report. The sales increase is driven by a “solid” economy and improving weather, analyst Gerrick Johnson wrote in the report.
“Most importantly, dealers have been quite positive on simply being Polaris dealers,” Johnson added. “This has been an ongoing trend we’ve been experiencing over the last 12 months. We find that positive commentary from dealers is generally a leading indicator of retail sales.”
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Additionally, it is speculated that Polaris will unveil a new addition to its RZR brand of side-by-side vehicles later this summer. The original 50”-wide RZR 900 and 570 models have been “basically unchanged” for 12 years, while the 64” RZR XP 1000 model has been on the market for nine years, Johnson noted. “An upgrade to either would be well-received by consumers,” he added.
The positive outlook has led BMO to upgrade its rating of Polaris from “Market Perform” to “Outperform.”
Meanwhile, on May 10, President Trump imposed a 25% tariff on goods imported from China, which Polaris Chief Executive Scott Wine said would be “downright catastrophic” for the company. Polaris has filed to be exempt from the tariffs, but it’s more likely that the tariffs will be reduced than increased, according to the report.
“We cannot, for sure, say that this is now the worst-case scenario—tariffs can presumably go higher,” Johnson said. “However, by upgrading the stock, we are assuming that there is a higher likelihood of tariffs being reduced or removed than increased.”