Polaris Earnings Report: Q1 2018

Posted on April 27, 2018 by Marc Cesare

The new 2018 Polaris Ranger XP 1000 EPS helped drive ORV sales in the first quarter according to the latest Polaris earnings call.

Polaris Industries reported first quarter 2018 revenues fo $1,297 million, an increase of 12% from the prior year. Adjusted net income for the quarter ended March 31, 2018 was $69 million compared to $48 million in the 2017 first quarter. ORV/Snowmobile segment sales were up 15% in Q1 driven by improved ORV shipments of side-by-sides worldwide as demand accelerated during the quarter.(ORV includes UTVs and ATVs). The following are highlights of the Polaris earnings call related to the small, task-oriented vehicle market.

ORV/Snowmobile segment sales were up 15% in Q1 to $833 million driven by improved ORV shipments of side-by-sides worldwide as demand accelerated during the quarter
Average Selling Price of ORV was up 4%
First quarter North American (NA) retail sales were driven side-by-side sales
NA side-by-side sales were up high single digits %
Important oil and agriculture market areas are improving
Side-by-sides gained market share in Ranger and RZR brands despite less promotional spending
Ranger business grew both in units and in dollars faster than the RZR business
The RZR RS1 demand was slightly higher than anticipated but management is not ready to call it a “Grand Slam” product
Global Adjacent Markets (GAM) grew revenue by 20% to $113 million and is looking for a strategic acquisition. This segments includes commercial ORVs, Defense, GEM, Aixam, Taylor-Dunn and Goupil sales)
GAM vehicle sales increased 25% with strong performance from Aixam, Goupil and government/defense business, and PG&A sales increased 19%
International ORV/Snow sales increased 20%
GAM international sales increased by 32%
Polaris has the leading ORV market share outside of North America
Polaris increased its full year 2018 sales guidance to up 4% to 6%
- ORV/Snow is expected to increase mid-single digits %
- GAM is expected to increase high single digits %
Management addressed the latest recalls and stated that they were part of the process of improving their systems, working with the CPSC and identifying any previous outstanding thermal issues. Moving forward under the new systems in place management expects to see fewer recalls involving a smaller number of vehicles.

Learn more: Seekingalpha.com (Polaris Earnings Call Transcript)

SVR’s Take: This was another strong Polaris earnings report and the last large recall appears to be related more to the company’s previous issues than an ongoing or new problem. The company seems to be back on track with strong performance in both Ranger and RZR and introducing innovative new products like the RZR RS1. I’m curious to see what the GAM acquisition they referred to could be. After the failed Eicher-Polaris JV are they going to try to buy their way into the Southeast Asian STOV market as an alternative? In the past they have often acquired strong brands that could be grown with improved financial and engineering resources as well as expanded distribution. I previously speculated on the pros and cons of Garia as an acquisition target, which offers a luxury international brand and electric vehicles.

Polaris Issues Massive RZR XP 1000 Recall

Posted on April 17, 2018 by Marc Cesare

The Polaris 2014 RZR XP 1000 in Pearl Black is one of the models being recalled.

Polaris has once again had to issue a major recall of over 100,000 side-by-sides. The recall involves approximately 107,000 model year 2014 to 2018 RZR XP 1000 and RZR XP 4 1000 vehicles. The exhaust silence can fatigue and crack leading to too much heat for the heat shield to manage which in turn lead to components melting or fire. Consumers should immediately stop riding the affected vehicles and contact a Polaris dealer for a free repair. The following recall information is from the Consumer Product Safety Commission.

Name of product: Model Year 2014-2018 Polaris RZR XP 1000

Hazard: If the exhaust silencer fatigues and cracks, the heat shield may not manage heat, which may lead to melting of nearby components or fire.

Remedy: Repair

Recall date: April 2, 2018

Units: About 107,000

Recall Details

Description:
This recall involves Model Year 2014-18 Polaris RZR XP 1000 recreational off-highway vehicles (ROVs). The ROVs have “POLARIS” stamped on the front and back grilles, and “Polaris,” “RZR,” “1000,” & “XP” stickers on the side panels. The Vehicle Identification Number (VIN) can be found on the right rear frame of the vehicle, to the rear of the engine. See CPSC.gov for specific model numbers.

Remedy:
Consumers should immediately stop riding the affected vehicles and contact a Polaris dealer for a free repair.

Incidents/Injuries: Polaris has received 30 reports of cracked exhaust silencers, including 3 reports of fire. No injuries have been reported.

Sold At: Polaris dealers nationwide since December 2013.

Manufacturer(s): Polaris Industries, Inc., of Minn.

Importer(s): Polaris Industries, Inc., of Minn.

Distributor(s): Polaris Industries, Inc., of Minn.

Manufactured In: United States and Mexico

Recall number: 18-133

Consumer Contact: Polaris at 800-765-2747 from 7 a.m. to 7 p.m. CT Monday through Friday or online at www.polaris.com and click on “Off Road Safety Recalls” at the bottom of the page for more information. In addition, check your vehicle identification number (VIN) on the “Product Safety Recalls” page to see if your vehicle is included in any recalls. Polaris is contacting all known affected consumers directly.

SVR’s Take: This is yet another massive recall for Polaris. The company was just starting to rebound from the previous rounds of RZR and Ranger recalls. Some of these models pre-date the company’s efforts to implement a new quality system and add personnel to address issues while others are from after that effort. It appears that either the silencer component was either poorly made or not designed robustly enough to perform the task. In some ways this recall may be worse the prior ones since the management has taken steps to remedy the quality issues but they yet again have a large recall. The Polaris brand will likely take a hit from this. Occasionally the company provides some brand metrics in their presentations to analysts and it will be interesting to hear what the management says about the recall in the next earnings call.

Massive Yamaha Golf Car & PTV Recall

Posted on February 26, 2018 by Marc Cesare

The 2018 Yamaha Drive2 is one of the models being recalled over a brake cable issue.

Yamaha Golf Car has issued a recall for over 160,000 golf cars, personal transportation vehicles (PTVs) and utility vehicles due to potential failure of the brake cables and subsequent crash hazard. The recall involves model year 2015 through 2018 gas and electric powered golf cars, PTVs and utility vehicles. Note that the utility vehicles from Yamaha Golf Car are different than those from the power sports manufacturer Yamaha Motors which makes the YXZ, Wolverine and Viking utility vehicles. This recall involves Yamaha Drive and Drive2 branded vehicles made by Yamaha Golf Car. For a detailed list of the model numbers and serial number ranges included check the CPSC.gov website. Owners can also contact Yamaha at 800-962-7926 or at www.yamahagolfcar.com. Owners should immediately stop using these recalled Golf Cars and PTVs and contact a local Yamaha Golf Car dealer to schedule a free repair. Yamaha is contacting all registered owners directly.

The following recall details are from the Consumer Product Safety Commission.

Name of product: Yamaha Golf Cars and Personal Transportation Vehicles (PTVs) Hazard: The brake cables on the golf cars and PTVs can fail, posing a crash hazard.

Recall date: February 22, 2018
Units: About 161,000

Description: This recall involves the following model year 2015 through 2018 gas and electric-powered golf cars , PTVs and utility vehicles. The vehicles were sold in various colors including blue, green, red, white, tan and silver. The model and serial numbers can be found on a label under the seat on the left or right side.

Remedy: Consumers should immediately stop using these recalled Golf Cars and PTVs and contact a local Yamaha Golf Car dealer to schedule a free repair. Yamaha is contacting all registered owners directly.

Incidents/Injuries: The firm has received 285 reports of brake cables failing. No injuries have been reported.

Sold At: Yamaha Golf Car dealers nationwide from November 2014 through December 2017 for between $5,900 and $7,700.

Manufacturer(s): Yamaha Motor Manufacturing Corporation of America, of Newnan, Ga.

Distributor(s): Yamaha Golf-Car Company, of Kennesaw, Ga.

Manufactured In: Assembled in United States
Recall number: 18-725

SVR’s Take: This is a very large recall and on par with the relatively recent large recalls from Polaris. This will likely cost Yamaha millions of dollars to remedy. More importantly, this might put a dent in Yamaha’s progress in gaining market share against Club Car and E-Z-GO. In the last few years, Yamaha has been touting how many thousands of golf courses have switched to their golf cars. The golf car market has always been highly competitive, and even more so in the last several years as golf course growth has declined or remained stagnant.

Marc Cesare, SmallVehicleResource.com

Textron Reports Q4 2017 Earnings

Posted on February 5, 2018 by Marc Cesare

The lithium powered Freedom RXV ELiTE helped drive E-Z-GO sales at Textron.

Textron, manufacturer of Arctic Cat and Textron Off Road utility vehicles, E-Z-GO golf cars and other small, task-oriented vehicles recently reported Q4 2017 financial results. Revenues in the quarter were $4.0 billion, up 5% from the fourth quarter of 2016. Textron segment profit in the quarter was $360 million, down $31 million from the fourth quarter of 2016. For the year revenue increased to $14.2 billion up from $13.8 billion. Textron also produces Bell helicopters, Citation jets and various military systems and products. Textron is forecasting 2018 revenues of approximately $14.6 billion, up 3% percent from the prior year.

The following are some of the highlights of the earnings call and presentation related to small, task-oriented vehicles.

Industrial revenues, which includes Arctic Cat, E-Z-GO and other Specialized Vehicles, were $1.1 billion for the quarter, up 20% largely related to the recent Arctic Cat acquisition.
Industrial segment profit was up $10 million from the fourth quarter of 2016 due to favorable performance.
E-Z-GO sales increased led by the new lithium powered ELiTE golf car which has seen over 21,000 units delivered
In December the new Havoc X side-by-side was introduced

Guidance for 2018

At industrial, we’re expecting growth in each of our businesses resulting in projected segment revenue of about $4.7 billion and a margin of about 8%.

Learn More: Seekingalpha.com (Earnings Call Transcript)

Polaris Q4 2017 Earnings

Posted on February 2, 2018 by Marc Cesare

The 2018 Polaris Ranger XP 1000 EPS helped drive sales for the quarter and the year.

Polaris Industries reported quarterly revenue of $1.431 billion and annual revenue of $5.429 billion, representing increases of 18% and 20% respectively compared to last year. Adjusted earnings per share for the quarter increased 25% driven by higher volume, lower promotional spend and operating expense leverage. For the year a 39% increase in earnings per share was driven by a combination of increased volume, an improvement in gross margins and a lower tax rate.

The following are highlights of the earnings call related to small, task-oriented vehicles.

ORV sales increased 14% in Q4 and 9% for the year
Average ORV selling price was up 4% for the quarter
ORV retail was up for the year but down for the 4th quarter as retail unit sales of Off-Road Vehicles were down just under 1%
Ranger sales were up for the quarter with strong demand for the new Ranger XP 1000 lineup
RZR sales declined for the quarter driven by “tapped demand and limited product availability”
For the quarter the ramp up of Ranger and RZR production was slower than expected in part attributed to the new quality initiative. This manifested as a production issue with a four-wheel drive component on the Ranger XP 1000, which was originally not up to the company’s quality standard.
Continued roll out RFM inventory and ordering system for side-by-sides and should be fully optimized by the second quarter
North American industry side-by-side growth was strong in Q4 but ATVs down.
Utility side of ORV is expected to grow but there is stiff competition on the RZR side which will not grow as much as competition increases
Agriculture markets were down in the fourth quarter and oil markets were up slightly, but there was no “substantial shift” in buying patterns.
In the side-by-side market decreased pricing is offset somewhat by decreased promotional costs and there is some commodity pricing pressures
Australia was a strong market as buyers switch from ATVs to UTVs
Global Adjacent Markets sales increased 19% in the fourth quarter, driven by strong growth in Aixam and Goupil, as well as continued strong sales growth in Government and Defense
For the year Global Adjacent Markets revenue reached almost $400 million including PG&A
Average selling price for Adjacent Markets increasing 14% for the quarter
For the full year Global Adjacent Markets sales increased 16% with all business lines growing
In Europe there is strong demand for small, inner-city delivery vehicles including electrics and that demand is increasing in the US as well
“More autonomous activities with both the military and Taylor-Dunn platforms than anywhere else in the company”

Guidance for 2018

Total company sales are expected to be up in the range of 3% to 5% with ORV market expected to be up
ORV market share is expected to be stable with continued momentum from Ranger and General product lines
ORV/Snowmobile sales are expected to be up low to mid-single digits with Snow about flat and ORV and PG&A sales up
Global Adjacent Markets sales are expected to be up mid single-digit percent with growth expected in all businesses.
The new long-term strategic targets for the company as a whole are 5% compounded annual growth rate for revenues and 15% for earnings
Management will be focusing on cost leadership more while maintaining innovation

Learn more: Seekingalpha.com (Earnings Call Transcript)

John Deere Recalls Large Number of Gator Crossover UTVs

Posted on December 21, 2017 by Marc Cesare

One of the Gator crossover utility vehicles part of a large recall by John Deere.

John Deere announced a large recall of their XUV crossover utility vehicle because of a steering shaft issue. The recall involves approximately 68,300 Gator XUV825, XUV825 S4, XUV855, and XUV855 S4 crossover utility vehicles sold between March 2012 and November 2017. The steering shaft can separate from the steering rack assembly and result in a loss of steering control. Consumers should immediately stop using the vehicle and contact their John Deere dealer for a free repair.

This is one of the largest recalls in the market in the last few years outside of the well publicized Polaris recalls in 2016. Any recall over 10,000 vehicles would be considered large compared to what typically occurs in the market. SVR tracks recent recalls of UTVs, LSVs and golf cars. Luckily, there have been no reports of injuries and only nine reports of steering control loss.

The following is recall information from the Consumer Product Safety Commission.

John Deere Recalls Crossover Gator Utility Vehicles Due to Crash Hazard (Recall Alert)

Name of product: John Deere Crossover Gator™ utility vehicles

Hazard: The steering shaft can separate from the steering rack assembly and result in a loss of vehicle steering control, posing a crash hazard.

Recall date: December 21, 2017

Units: About 68,300

Description: This recall involves John Deere models XUV825, XUV825 S4, XUV855, and XUV855 S4 Crossover Gator utility vehicles equipped with power steering. The model number and “John Deere” are printed on the side of the vehicle. The serial number begins with 1M0825 or 1M0855 and is located on the passenger side of the frame under the cargo box. The vehicles have seating for two or four passengers.

Remedy: Consumers should stop using the recalled utility vehicles and contact an authorized John Deere dealer for a free repair. John Deere is contacting purchasers of the recalled utility vehicles directly.

Incidents/Injuries: John Deere has received nine reports of steering loss. No injuries have been reported.

Sold At: John Deere dealers nationwide from March 2012 through November 2017 for between $13,400 and $16,100.

Manufacturer(s): Deere & Company, of Moline, Ill.

Manufactured In: U.S.

Recall number: 18-709

Consumer Contact: Deere & Company at 800-537-8233 from 8 a.m. to 6 p.m. ET Monday through Friday and Saturday from 9 a.m. to 3 p.m. ET or online at www.deere.com and select Product Recall Information on the drop-down menu under Services & Support for more information.

Learn more: CPSC.gov

Tata Ace Mini-truck Reaches 2 Million Vehicle Milestone

Posted on December 21, 2017 by Marc Cesare

The Tata Ace Mega is one variant of the popular mini-truck from Tata Motors.

Tata Motors of India recently announced that the 2 millionth Tata Ace mini-truck had been sold. The company reached the milestone in 12 years. The Tata Ace is popular in India and other Southeast Asia countries where mini-trucks and a host of other small vehicles are used for “last mile” transportation in a spoke and hub system. According to Tata management the company controls 65% of the mini-truck market. Other players in the market include Mahindra with their Jeeto vehicle and Piaggio with their Porter 700.

The Tata Ace platform has grown into over a dozen offerings since being launched in 2005. The Tata Ace family includes brands like Ace, Zip, Mega and Mint for cargo transport and Magic, Mantra and Iris for passenger transport. The vehicles come in a range of engine power, engine type and body configurations to fit a wide spectrum of end-use applications in urban to rural settings. For example they offer the Super Ace Mint with a suction machine for sewage and manhole cleaning and other models are specifically designed for use as food trucks. Small scale transporters and entrepreneurs are the main target customers for these vehicles.

Mini-trucks are not as popular in the United States, in part, because the do not meet safety and emissions regulations for on road use. There are about a dozen states that allow them limited access to roads with a speed restriction typically in the 25 mph to 35 mph range. They are more popular in some farming communities where they have served as a utility vehicle for use off-road or on road moving between fields. To a large degree the UTV has functionally become the US version of the mini-truck. Learn more: Tatamotors.com

Marc Cesare, Smallvehicleresource.com

BRP Reports Quarterly Earnings – FY2018 Q3

Posted on December 8, 2017 by Marc Cesare

The Can Am Defender Max and the Defender line as a whole helped drive sales.

The Maverick X3 X RS Turbo R and other X# models have helped drive sales as well.

BRP reported third quarter earnings for fiscal year 2018 of $1,241million ($C), a 15% increase from last year. Sales were driven by their Year-Round Products division which includes side-by-sides and Seasonal Products division which includes snowmobiles. For the quarter, Year-Round Products revenue increased $77 million or 20.1% to $460.9 million mainly on higher volume of Maverick X3 and the newly launched Maverick Trail.

The following are highlights of the earnings call related to the side-by-side market.

Side-by-side retail increased low 30% compared to an industry up high single digits
Launched the new 50″ wide Maverick Trail marking entry into the trail segment
Announced investment to increase their manufacturing capabilities in Mexico in response to ongoing strong demand for Defender and X3 models
North America side-by-side industry up low teen percent for the first third of the model year
Can-Am’s international side-by-side retail sales were up 80% for the quarter and the Defender and Maverick MAX models grew over 100% in markets like Mexico, China and Europe
The management stated that they did not follow some of their competitors who were aggressive with promotions in the quarter
The Defender line continues to make inroads into the farm and rural markets
Commander sales are flat to low single digit growth and the company has lost market share in that segment but gained share in the overall market
The management believes that better and more feature rich products across the industry are helping to drive replacement of older vehicles

Learn more: Finance.yahoo.com (Earnings call transcript)

This marks another strong quarter for BRP as they continue to gain market share in the side-by-side market. Management expects to continue to follow their plan of adding new models every six months until 2020. The overall market appears to remain steady and strong with solid growth.

Marc Cesare, Smallvehicleresource.com

Textron Recalls Arctic Cat Wildcat UTVs

Posted on November 29, 2017 by Marc Cesare

The 2017 Arctic Cat Wildcat Trail SE is being recalled due to a winch issue.

The 2017 Arctic Cat Wildcat Sport SE is being recalled as well.

Textron Specialized Vehicles recently announced the recall of approximately 300 model year 2017 Arctic Cat Wildcat Trail SE and Wildcat Sport SE utility vehicles as well as approximately 3,000 winch accessory kits sold for 2014 to 2017 Wildcat Trail and Wildcat Sport UTVs. The winch solenoid can overheat and pose a fire hazard. Owners should stop using the vehicles and contact Arctic Cat to schedule a free repair. Arctic Cat can be contacted at 800-279-6851 from 8 a.m. to 5 p.m. CT Monday through Friday or online at www.arcticcat.com and then click on Product Recall for more information.

This is a small recall but unique in that it is more a recall of the winch accessory than the vehicle themselves as the recalled winches outnumber the recalled vehicles 10 to 1.

The following are the recall details from the Consumer Product Safety Commission

Name of product: Arctic Cat ROVs with winches

Hazard: The winch solenoid located under the operator seat can overheat, posing a fire hazard.

Remedy: Repair

Recall date: November 16, 2017

Recall number: 18-037
Recall Details

Description: This recall involves all 2017 Arctic Cat Wildcat Trail SE (Special Edition) and Wildcat Sport SE ROVs with winch solenoids installed as original equipment and winch accessory kits sold separately for use on 2014 through 2017Arctic Cat Wildcat Sport and Wildcat Trail ROVs. The ROVs have four wheels, side-by-side seating for two people, and have a black chassis. “Wildcat Trail” or “Wildcat Sport” is printed on each side of the vehicle. In addition, Special Edition ROVs have “SE” printed on each side.

Remedy: Consumers should immediately stop using the recalled ROVs and contact Arctic Cat to schedule a free repair. Arctic Cat is contacting all known purchasers directly.

Incidents/Injuries: The firm has received 49 reports of winch solenoid failure, with five resulting in fires. No injuries have been reported.

Sold At: Arctic Cat dealers nationwide from February 2017 through August 2017 for about $17,000 for the ROVs with the winch accessory kits installed. The winch accessory kits were also sold separately from December 2013 through August 2017 for between $200 and $600.

Manufacturer(s): Arctic Cat Inc., of Thief River Falls, Minn., a subsidiary of Textron Specialized Vehicles, of Augusta, Ga.

Manufactured In: United States

Units: About 300 ROVs and 3,000 winch accessory kits (In addition, 124 were sold in Canada)

Learn more: CPSC.gov

Polaris Recalls General UTVs

Posted on October 31, 2017 by Marc Cesare

The 2016 Polaris General 1000 is being recalled.

This 4-seat 2017 Polaris General 4 1000 is being recalled as well.

Polaris announced the recall of model year 2016 and 2017 General two and four seat side-by-sides. The steering wheel shaft can shift and detach while in use, resulting in a loss of control and crash hazard. Approximately 19,000 units are involved in the recall. Consumers should stop using the vehicles and contact Polaris for a free repair.

This is another large recall for Polaris and a different mechanical issue as well. In addition, the recall pertains to their General crossover line that has been selling well since its introduction. The previous large recalls were for their Ranger and RZR products. Given the model years involved, these vehicles were likely built before the company instituted new processes and added more people to improve vehicle quality and track safety issues faster. Assuming the changes are effective, another year or two may be needed before the company completely works through any legacy quality issues across their extensive product lineup.

The following recall information is from the Consumer Product Safety Commission.

Name of product: Polaris General side-by-side recreational off-highway vehicles (ROVs)

Hazard: The steering wheel shaft can shift and detach while in use, resulting in a loss of control and crash hazard.

Recall date: October 30, 2017

Recall number: 18-018

Consumer Contact: Polaris at 800-765-2747 from 7 a.m. to 7 p.m. CT Monday through Friday or online at www.polaris.com and click on “Off Road Safety Recalls” for more information. In addition, consumers can check vehicle identification numbers (VIN) on the “Product Safety Recalls” page to see if your vehicle is included in any recalls.

Recall Details

Description: This recall involves model year 2016 and 2017 Polaris General 2- and 4-seat side-by-side recreational off-highway vehicles. The vehicles were sold in black, blue, camouflage, orange, red, silver and white and have a cargo box on the back. “Polaris” is printed on the front grill, “GENERAL” is printed on the rear panel and “1000” is printed on the front panel. The VIN is printed on the left rear vehicle frame below the cargo box.

Remedy: Consumers should immediately stop using the recalled ROVs and contact Polaris to schedule a free repair. Polaris is contacting all known purchasers directly.

Incidents/Injuries: Polaris has received five reports of the steering shaft separating and one report of a broken hand injury.

Sold At: Polaris dealers nationwide from December 2015 through September 2015 for between $16,000 and $21,000.

Manufacturer(s): Polaris Industries Inc., of Medina, Minn.

Manufactured In: U.S. and Mexico

Units: About 19,000

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