Investors in Polaris Inc. (NYSE:PII) had a good week, as its shares rose 2.9% to close at US$94.50 following the release of its annual results. Revenues of US$6.9b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$5.20, missing estimates by 2.1%. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the latest consensus from Polaris’s 13 analysts is for revenues of US$7.02b in 2020, which would reflect a modest 2.3% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to jump 24% to US$6.56. Yet prior to the latest earnings, analysts had been forecasting revenues of US$7.09b and earnings per share (EPS) of US$6.58 in 2020. So it’s pretty clear that, although analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.
There were no changes to revenue or earnings estimates or the price target of US$111, suggesting that the company has met expectations in its recent result. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Polaris analyst has a price target of US$125 per share, while the most pessimistic values it at US$95.00. The narrow spread of estimates could suggest that the business’ future is relatively easy to value, or that analysts have a clear view on its prospects.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We would highlight that Polaris’s revenue growth is expected to slow, with forecast 2.3% increase next year well below the historical 8.7%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 15% per year. So it’s pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Polaris.
The Bottom Line
The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Polaris’s revenues are expected to perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn’t be too quick to come to a conclusion on Polaris. Long-term earnings power is much more important than next year’s profits. We have estimates – from multiple Polaris analysts – going out to 2022, and you can see them free on our platform here.
It might also be worth considering whether Polaris’s debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.