Polaris shares surge on Indian Motorcycle unit spin-off, profit forecast

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By Aishwarya Jain

(Reuters) -Shares of Polaris rose more than 9% on Tuesday after the power-sports vehicle maker said it would spin off its Indian Motorcycle unit and forecast a third-quarter profit, beating Wall Street’s loss expectations.

The company also sold a majority stake in the business to private equity firm Carolwood LP for an undisclosed value.

The deal is expected to boost Polaris’ annual profit by about $1 per share and increase adjusted EBITDA by roughly $50 million, the company said in a statement on Monday.

“The motorcycle business has always been a volume game, and PII struggled to drive the growth necessary to get the unit to consistent profitability,” Citi analyst James Hardiman wrote.

Polaris would have needed to invest significant capital to turn the segment around, he said.

“We think investors are pleased that capital is being reallocated from a laggard business into long-standing product lines on which the brand’s intangible asset was built,” said Jaime Katz, analyst at Morningstar Equity.

The deal should free up Polaris to concentrate more resources on its core off-road vehicles business amid a challenging competitive environment, Keybanc analyst Noah Zatzkin said.

The company said it expects third-quarter adjusted per-share profit in the range of 31 cents to 41 cents, compared to a loss of 16 cents expected by analysts, according to data compiled by LSEG.

“The simultaneous positive pre-release of Q3 results… prompts us to lift our estimates and increase our price target to $54 from $41,” said Scott Stember, analyst at Roth Capital Partners.

Shares of Polaris, which closed nearly 9% up at $61.36 on Monday, trade at about 70.84 times their forward profit estimates, compared to an industry median of 9.62.

(Reporting by Aishwarya Jain in Bengaluru; Editing by Vijay Kishore)