Moody’s affirms Polaris stock rating, shifts outlook to stable

Moody's Ratings has affirmed Polaris Inc.'s (NYSE:PII) Baa3 long-term issuer rating and senior unsecured rating on Thursday. The stable outlook highlights an anticipated sales recovery in 2026 and 2027, aided by the company's reduced dealer inventory levels over the past few years. The firm expects leverage to decrease to approximately 2.5x by the end of 2027 from 3.6x in the 12 months ending June 2026.

Polaris' Baa3 rating is driven by its dominant position in the North American powersports industry, particularly in off-road vehicles for both recreational and utility segments. The rating also acknowledges the competitive nature of the powersports industry, where demand is particularly sensitive to economic cycles due to the highly discretionary nature of recreational products.

Moody's anticipates key credit metrics to improve in 2026-27, fueled by a year-on-year sales recovery that started in the third quarter of 2025. The rating expects profitability, measured by EBIT margin, to reach around 5-6% in 2027, though it remains relatively low for the current rating. As of June 2026, Polaris holds $302 million in cash and has $931 million available under its $1.4 billion revolving credit facility.

The company is expected to generate moderately negative free cash flow in 2026, but this is anticipated to improve in 2027.