Polaris shares fall on Indian Motorcycle charge, cautious outlook
Polaris takes $288M impairment on motorcycle division while announcing divestiture to private equity firm
Polaris Inc. shares declined 4.2% on Tuesday after the powersports manufacturer reported a substantial quarterly loss driven by impairment charges on its Indian Motorcycle division, even as revenue topped analyst expectations.
The Medina, Minnesota-based company recorded a net loss of $303.6 million for the fourth quarter, a dramatic reversal from the $10.6 million profit posted in the same period a year earlier. The loss included a $288 million non-cash impairment charge related to Indian Motorcycle, alongside an additional $54 million impairment within the off-road vehicle segment.
Despite the headline loss, Polaris's core business demonstrated resilience. Adjusted revenue climbed 9% year-over-year to $1.92 billion, exceeding the $1.79 billion consensus forecast among analysts. On an adjusted basis, earnings per share reached $0.08, though this missed the $0.21 analysts had anticipated.
The quarterly results coincided with a strategic announcement that Polaris will sell a majority stake in Indian Motorcycle to Carolwood LP, a private equity firm, with the transaction expected to close in the first quarter of 2026. The company also disclosed plans to separate the motorcycle business into a standalone entity.
Analysts view the divestiture as a positive step that could unlock value for shareholders. The separation is projected to be immediately accretive to adjusted earnings per share and EBITDA margins, providing an estimated benefit of $0.75 to $0.80 per share in 2026, factoring in that Indian Motorcycle's results will be included for part of the first quarter.
For 2026, Polaris guided for adjusted earnings per share of $1.50 to $1.60, suggesting a turnaround from the challenging year just concluded. However, investors expressed concerns about the company's cautious outlook, which accounts for significant headwinds.
Chief among those challenges are tariffs that Polaris estimates will cost approximately $90 million in 2026. The company outlined mitigation strategies, including plans to reduce China-based material costs to below 5% by the end of 2027. Management also noted retail sales softness in the marine segment and ongoing pressure on dealer inventory levels.
Beneath the headline charges, Polaris made progress on operational improvements during 2025. The company achieved over $60 million in operational savings and reduced warranty expense by $25 million through improved quality systems. Additionally, Polaris lowered its debt load by roughly $530 million over the course of the year.
The Indian Motorcycle sale represents a strategic pivot for Polaris, allowing management to focus more intently on its core off-road vehicle and marine businesses. Analysts anticipate that this concentration on the company's strongest segments could improve overall margins and profitability in the coming years.
Polaris stock has experienced significant volatility over the past 12 months, trading in a range between $29.73 and $74.60. The current price of $66.18 reflects investor uncertainty about the company's path forward, particularly given the tariff exposure and competitive pressures in the powersports market.
With 14 of 16 analysts rating the stock a hold, the market appears to be in wait-and-see mode as the Indian Motorcycle transaction progresses and management demonstrates its ability to execute the turnaround strategy. The $68.23 average price target among analysts suggests modest upside potential if the company can successfully navigate the tariff headwinds and deliver on its 2026 guidance.