Let it snow! Profits vroom at Polaris, Arctic Cat

  • Article by: SUSAN FEYDER , Star Tribune
  • Updated: January 27, 2011 - 10:57 PM

After being beaten down in the recession, Polaris and Arctic Cat post significant spikes in sales and earnings.

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Polaris snowmobiles

At Frontier Powersports in Fergus Falls, the stock of new Arctic Cat and Polaris Industries snowmobiles has shrunk from 70 models to just three. The dealership hasn't had a used snowmobile to sell since November.

Sales representative Steve Piechowski says he has to turn away dealers in Western states that call clamoring for supplies.

"The snow we've gotten here and out West is a big reason," he said of the rise in sales. But Piechowski also said that customers who deserted the powersports market during the recession have started to come back. Some are purely recreational users, but many are buyers who want snowmobiles and all-terrain vehicles for work.

"We're in agricultural territory here, and the crops and prices were good," he said. Business also is coming from oil and gas workers in North Dakota, he said.

Arctic Cat and Polaris Thursday both credited new products, growth in international markets and, in Arctic's case, improvement in that non-recreational side of the business, with significant increases in sales and earnings.

They also said a greater willingness to spend by U.S. consumers -- some spurred by this winter's heavy snows -- contributed to the robust results.

Medina-based Polaris reported that higher sales of all its products -- snowmobiles, off-road vehicles and Victory motorcycles -- fueled a 31 percent increase in revenue to $618.4 million in its fourth quarter ended Dec. 31. Two-thirds of its sales are being fueled by new products, the company said. Earnings were $54.5 million, or $1.55 a share, compared with $43.9 million, or $1.31 a share, for the period a year earlier.

Thief River Falls-based Arctic Cat said sales for the third quarter ended Dec. 31 totaled $152 million, up 16 percent. Earnings were $9.3 million, or 50 cents a share, versus $2.6 million, or 14 cents a share, in the same quarter a year earlier. Snowmobile sales increased 33 percent while ATV sales rose 1 percent.

The results mark a substantial change for both companies, which saw their annual sales drop by 20 percent during the depths of the recession.

Both companies are expecting the positive momentum to continue this year. Polaris said its 2011 earnings-per-share should be in the range of $4.65 to $4.85, up 13 percent from 2010. Sales in 2011 are expected to increase 8 percent to 11 percent.

Arctic raised and narrowed its estimated earnings for the fiscal year ending March 31. The company now anticipates that earnings will be in the range of 57 cents to 65 cents a share, driven by increased international revenue and higher gross margins. The company previously forecast earnings of 40 cents to 55 cents a share.

Wall Street bid up Arctic's share price almost 18 percent Thursday. The stock closed at 16.13 a share.

Polaris shares fell 2.4 percent to $75.88, erasing gains from earlier this week. Mark Smith, an analyst at Feltl and Co., attributed the decline to the market's reaction to an expected increase in the number of diluted shares this year.

Both companies' shares are outperforming consumer discretionary stock indexes compiled by Standard & Poor's.

In a recent research report, Craig Kennison, an analyst at Robert W. Baird & Co., said his survey at 42 dealerships found customer traffic to be "slow but more serious." Some dealers told him that credit is loosening, making it easier for buyers to borrow. The approval rate for customers using Polaris' retail credit programs was 62 percent in the fourth quarter, up from 54 percent a year earlier.

Smith said he also believes that core recreational vehicle customers have begun to do more than just window shop. "We're very bullish on the rural economy and think it's helping macroeconomic trends," Smith said.

In a recent presentation to analysts, Arctic Cat said farming and ranching account for about 17 percent of its single-seat ATV sales and 23 percent of its sales of two-passenger, side-by-side models.

Susan Feyder • 612-673-1723

  • ARCTIC CAT INC.

    3RD QUARTER FY2011, 12/31 2011 2010 % chg. Revenue $152.0 $131.0 +16.0 Income 9.3 2.6 +256.0 Earn/share 0.50 0.14 +257.1 9 months Revenue $391.2 $366.7 +6.7 Income 22.6 11.4 +97.6 Earn/share 1.22 0.63 +93.7 Figures in millions except for earnings per share.

    POLARIS INDUSTRIES INC.

    4TH QUARTER FY2010, 120/31 2010 2009 % chg. Revenue $618.4 $471.8 +31.1 Income 54.5 43.9 +24.2 Earn/share 1.55 1.31 +18.3 12 months Revenue $1,991.1 $1,565.9 +27.2 Income 147.1 101.0 +45.7 Earn/share 4.28 3.05 +40.3 Figures in millions except for earnings per share.
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