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Polaris Industries shares drop on slashed full-year outlook, recall impact

An employee welds the frame of an Eicher Polaris Pvt. Multix personal utility vehicle at the company's factory in Jaipur, Rajasthan, India.
Udit Kulshrestha | Bloomberg | Getty Images
An employee welds the frame of an Eicher Polaris Pvt. Multix personal utility vehicle at the company's factory in Jaipur, Rajasthan, India.

Shares of American manufacturer Polaris Industries dropped as much as 9 percent intraday Monday after the company cut its full-year guidance following delayed shipments and the recall of its off-road vehicle RZR Trubo.

The stock later recovered some of those losses and ended the day down 5 percent.

The company now expects fiscal full-year 2016 earnings to be in the range of $3.30 to $3.80 per share. It previously expected earnings in the range of $6.00 to $6.30.

The snowmobile and ATV-maker cut its forecast in part because the financial impact from the recall of its RZR Turbo, which the company said posed a potential fire hazard.

"We share the frustration of our customers and dealers and we are working diligently to expedite the completion of the recall repairs and significantly improve the quality and safety of our products," Scott Wine, Polaris' Chairman and CEO, said in a press release.

The company also cited delayed shipments of its 2017 ORV products and higher promotional costs to "rebuild confidence and credibility with RZR owners."

KeyBanc Capital Markets released a report on Monday saying Polaris has had a "messy" year and contained a number of one-time related impacts.

"The extent of the repair on the RZR Turbo is much more complex than originally anticipated and has consequently delayed the timing of RZR shipments and resulted in increased promotional/brand wellness spend as well as a higher warranty accrual," Equity Research Analyst Scott Hamann said in the note.

He downgraded the stock to "sector weight" from "overweight" with a price target of $80.84. The stock was trading at $75.17 a share Monday afternoon.

Polaris also expects total company sales for 2016 to be down "in the mid to high-single digit percent range" compared to prior guidance of flat to down 2 percent.

Polaris' stock is down more than 10 percent year to date.

PII 2016 Chart