Seriously, Polaris Industries (NYSE: PII), this isn't even funny anymore. The powersports vehicle manufacturer just announced it was recalling yet another of its models -- the Sportsman 570 Touring and X2 all-terrain vehicles -- because of a potential fire hazard. Apparently, there's a problem with the air intake duct that can cause it to contact the fuel rail in a way that might cause a fuel leak and a fire. It's getting to the point where almost every Polaris model seems to have a chance of spontaneously combusting.
What started with a fire hazard recall of its popular RZR side-by-side vehicles has since spread to its Ranger ATVs, its Slingshot three-wheel motorcycles, and its Indian motorcycles. And despite assurances from management that it is working through the problem, the fact it continues to announce fresh recalls for additional lines suggests that it not only doesn't have the problem in hand, but may not even know what the root cause is.
In its third-quarter earnings report, Polaris said revenue had fallen 9% to $3.6 billion so far for the year, while net income plunged 80% to $32.3 million, or $0.50, from $155.2 million, or $2.30 per share, a year earlier, due to the combination of a weakening environment for the powersports industry and the impact of its recalls. It's scheduled to report fourth-quarter earnings later this month, and investors should be wary of the toll the recalls will take.
Polaris is recalling approximately 9,900 Sportsman ATVs manufactured between 2014 and 2017 that retailed anywhere from $7,700 to $11,000. It reports receiving 35 reports of damaged fuel rails and leaks, though no injuries have been reported related to the defects. It was the death of one ATV rider in 2015 that sparked the initial fire hazard recall, leading to those additional recalls through 2016.
By the looks of it, this problem will keep plaguing the company through 2017, too.
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Rich Duprey has no position in any stocks mentioned.