KeyBanc analyst Noah Zatzkin reiterated an Overweight rating on the shares of Polaris Inc (NYSE:PII) and raised the price target from $135 to $145.
The analyst said PII delivered a broad Q2 beat versus consensus with EPS +$0.21 on sales +$73 million.
Healthy volume and price/mix drove sales beats in Off-road (+$68M) and On-road (+$53M), offset by softer Marine sales (-$48M), while warranty and production inefficiencies kept the gross margins in line with consensus.
The analyst argued for a bull case saying gross margins will rebound further as modularity progresses, volumes remain consistent, and On-road proves durable.
The analyst raised FY23E EPS to $10.55 (from $10.25), reflecting the beat and ORV retail/wholesale momentum, offset by softer marine demand and ORV GM recovery apprehension. The analyst’s FY24E stands at $10.85 (from $10.70).
The analyst sees green shoots in PII’s solid retail color, another category-defining product to be announced next week, and channel metrics that still screen the healthiest across the broader leisure space.
The analyst also sees valuation grinding higher against improving retail dynamics for Polaris.
Price Action: PII shares are trading higher by 2.78% at $136.50 on the last check Wednesday.
