Off-Road and powersports vehicle corporation Polaris (NYSE:PII) announced better-than-expected revenue in Q4 CY2024, but sales fell by 24.1% year on year to $1.76 billion. Its non-GAAP profit of $0.92 per share was 1.9% above analysts’ consensus estimates.
Is now the time to buy Polaris? Find out by accessing our full research report, it’s free.
Polaris (PII) Q4 CY2024 Highlights:
- Revenue: $1.76 billion vs analyst estimates of $1.68 billion (24.1% year-on-year decline, 4.4% beat)
- Adjusted EPS: $0.92 vs analyst estimates of $0.90 (1.9% beat)
- Adjusted EBITDA: $168.2 million vs analyst estimates of $175.5 million (9.6% margin, 4.1% miss)
- 2025 Guidance: "full year adjusted earnings per share expected to be down ~65 percent" (large miss)
- Operating Margin: 3.7%, down from 6.2% in the same quarter last year
- Free Cash Flow Margin: 7.8%, down from 19.4% in the same quarter last year
- Market Capitalization: $3.15 billion
Company Overview
Founded in 1954, Polaris (NYSE:PII) designs and manufactures high-performance off-road vehicles, snowmobiles, and motorcycles.
Leisure Products
Leisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Unfortunately, Polaris’s 1.1% annualized revenue growth over the last five years was weak. This was below our standards and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Polaris’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 8.4% annually. 
This quarter, Polaris’s revenue fell by 24.1% year on year to $1.76 billion but beat Wall Street’s estimates by 4.4%.
Looking ahead, sell-side analysts expect revenue to decline by 2.9% over the next 12 months. Although this projection is better than its two-year trend, it's hard to get excited about a company that is struggling with demand.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.
Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Polaris has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.2%, lousy for a consumer discretionary business.
Polaris’s free cash flow clocked in at $137.3 million in Q4, equivalent to a 7.8% margin. The company’s cash profitability regressed as it was 11.6 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends trump temporary fluctuations.
Over the next year, analysts predict Polaris’s cash conversion will slightly improve. Their consensus estimates imply its breakeven free cash flow margin for the last 12 months will increase to 1.5%, giving it more money to invest.
Key Takeaways from Polaris’s Q4 Results
We enjoyed seeing Polaris exceed analysts’ revenue expectations this quarter, but it is worrisome that topline declined over 20% year-on-year. Management cited "lower volume due to planned reductions in shipments as we actively managed dealer inventory in a subdued retail environment." EBITDA also missed. Looking ahead, the company guided to meaningful declines in EPS in 2025 compared to 2024, missing expectations. Overall, this quarter was weak, and the stock traded down 5.8% to $53.20 immediately following the results.
Is Polaris an attractive investment opportunity right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.