Despite Guidance Cut, Wunderlich Sees A Unique Buying Opportunity In Polaris Industries

Wunderlich reiterated its Buy rating on Polaris Industries Inc. (NYSE: PII) despite full-year guidance cut by the company on overall sluggish industry trends and higher costs from recent product recalls.

"As we look out to 2H:16 and 2017, we believe the lack of notable competitive product introductions for next year in the core off-road vehicle (ORV) market, combined with Polaris' upcoming new model blitz to be unveiled next week, could provide investors an intriguing buying opportunity," analyst Rommel Dionisio wrote in a note.

Polaris reported second quarter revenue of $1.131 billion and EPS of $1.09, exceeding consensus forecasts of $1.100 billion and $1.05, respectively, despite increased warranty and legal expense.

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However, in the face of continued market share declines in ORV, and higher warranty expense, the company lowered 2016 guidance for revenue growth from a range of -2 percent–+3 percent to -2 percent–flat, and for EPS from $6.20–$6.80 to $6.00–$6.30.

In addition, the management now targets the ORV segment to see a mid-single-digit shipment decline in 2016, down from previous guidance of a low- to mid-single-digit decline.

Meanwhile, the analyst also cut his revenue estimates for 2016 to $4.646 billion from $4.794 billion, and for 2017 to $4.871 billion from $5.017 billion. Dionisio trimmed his EPS estimates for 2016 to $6.10 from $6.60, and for 2017 to $6.86 from $7.22.

"Successful new product launches could potentially drive upside to such forecasts, however," Dionisio added.

Shares of Polaris closed Wednesday's regular trading session at $95.03. The analyst maintains his price target of $112, representing a potential upside of 18 percent.

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