2022 Week 21: Polaris Inc (NYSE: PII)

Portfolio Update

The FiveTwenty portfolio received $104.04 in dividends in the past week. ABBV and PG paid their quarterly dividends during the week.

Past Week Dividend$104.04
Current Quarter Dividend (Q2 2022)$467.64
LifeTime Dividend$3,752.31
Estimated Annual Dividend$5,226.26
Dividend Scorecard

The capital allocation for the week of 05/22/2022 to 05/28/2022 will be used to add to our position in Polaris Inc. (NYSE: PII).

PII – Position Update

Since our last check-in on PII in week 16 of 2022, the company reported Q1 2022 earnings on 04/26/2022. In addition, the share price decreased 8.1% from $107.24 to $98.57.

TTMPrev. Update10-year median
Dividend Streak27 years27 years
Yield2.57%2.36%1.97%
Payout Ratio31.12%127.68%2
P/E12.12111.732
Entry Criteria Scorecard

1 computed using TTM adjusted EPS of $8.13 as of Q1 2022
2 computed using TTM adjusted EPS of $9.14 as of Q4 2022

Q1 2022 earnings report

Did PII’s latest earnings report raise any warning flags?

PII Q1 2022 earnings missed expectations by a significant margin. The miss was driven by flat revenue compared to the year ago quarter as well as increased supply chain challenges and inflation. The bright spot in the earnings report was that demand for the company’s products remained strong. Overall revenues were flat, adjusted net earnings decreased (45.6)%, and adjusted EPS were (43.9)% lower than in Q1 2021.

Revenue
(in millions)
Adj. Net Income
(in millions)
Adj. EPS
.
Q1 2021$1,951.1$145.6$2.30
Q1 2022$1,956.8$79.2$1.29
% Change0.3%(45.6)%(43.9)%

Additional noteworthy developments during the quarter:

  • PII repurchased 1.5 million shares during the quarter.

Looking ahead, PII re-iterated full year 2022 expectations of revenue in the range of $9,215 to $9,455 million, an increase of 12% to 15% over 2021, and adjusted EPS in the range of $10.10 to $10.40, an increase of 11% to 14% from 2021.

Thesis

Why are we adding to our position in PII?

We continue to believe in the long-term prospects of the company. With full year 2022 guidance un-changed it seems that Q1 2022 challenges are expected to be overcome in the later stages of the year.

The weak Q1 2022 number have driven the share price down and created an opportunity to add to our position at an improved valuation.

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