Polaris Q3 Earnings Raises Questions About Its Motorcycle Division

Polaris Industries (NYSE: PII) had an impressive showing in its Q3 results, released last week. Reported and adjusted sales were up 7%, North American UTV (utility task vehicle) sales were up low single digits, and the powersports company saw a 24.6% boost to its gross profit margin. Polaris is doing well with its bread-and-butter of off-road recreational vehicles like the RZR and Ranger lines, but there's one part of its business that was a bit of a dark spot on its Q3 earnings report: the motorcycles division.

I wouldn't blame you if you didn't know Polaris had a motorcycles division until today. But it does, and its performance has been a bit of a mixed bag lately. Polaris Motorcycles consists of two brands; Indian Motorcycle and the Polaris Slingshot. Indian Motorcycle boasts the title of America's first motorcycle company; the Polaris Slingshot is a three-wheeled open-air roadster that is classified in most states as an "autocycle" (which means you don't need a separate motorcycle license to drive it).

In Polaris' Q3 earnings report, motorcycle segment revenue was down 3%, which isn't a major change, but gross profit was down a considerable 39% compared to the same quarter in 2018. That's the biggest gross profit change of any Polaris segment this quarter, and it's a change in the wrong direction. Motorcycles is a fairly small part of Polaris' bottom line compared to off-road vehicles and snowmobiles -- only 2.7% of the company's total gross profits -- but the decline is big enough that it raises some questions about the viability of that part of Polaris' business.

Source Fool.com