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Wall St. keeps smiling on Polaris; stock up 4%

Sales of all product lines increased and earnings rose 90 percent.

July 20, 2011 at 3:45AM
Sales of Polaris' off-road vehicles increased 41 percent.
Sales of Polaris’ off-road vehicles increased 41 percent. (Polaris/The Minnesota Star Tribune)

Wall Street continues to reward Polaris Industries Inc. for delivering on its strategy to become a bigger, more diversified player in the power-sports industry.

The stock, which has been bumping along at record highs in recent months, rose more than 4 percent Tuesday after the Medina-based company posted strong sales and earnings gains that spread across all product lines and topped analysts' estimates. Its closing price Tuesday of $118.06 a share is close to double the price 12 months ago.

Even so, some analysts raised their target prices on the stock after the company reported results and said it was boosting its forecast for the year.

"Our [dealer] checks indicate healthy demand and lean inventory, supporting our favorable fundamental outlook," said R.W. Baird analyst Craig Kennison in a research report Tuesday. He increased his target price by $5 to $130.

Polaris' sales rose 41 percent for the quarter ended June 30 to $607.9 million. Earnings jumped 90 percent to $48.7 million, or $1.37 a share. Analysts had expected sales of $548 million and earnings per share of $1.18.

Sales of off-road vehicles increased 41 percent, powered mainly by strong sales of side-by-side vehicles and from its military business and partnership with Bobcat. In a conference call, CEO Scott Wine said Polaris also posted a gain in sales of single-seat all-terrain vehicles, bucking the industrywide downward trend.

Wine noted that the company's Monterrey, Mexico, plant is now operating, a move that should help cut off-road vehicle production expenses as it moves several operations from Osceola, Wis., to Mexico. The Mexico facility currently has about 600 workers.

On-road vehicle sales almost doubled in the quarter to $30.9 million, fueled mostly by increased sales of Victory brand motorcycles. The strong report came the same day its prime competitor, Harley-Davidson Inc., said its second quarter U.S. sales rose for the first time in five years while its earnings more than doubled.

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Polaris does not break out income figures for its product segments, but analysts say the on-road business currently is unprofitable, although it is getting close to breaking even. Responding to a question on the conference call, Wine indicated profitability may be delayed somewhat by costs associated with its recent acquisitions of Indian Motorcycle and Global Electric Motorcars.

Sales of snowmobiles, the smallest business segment, rose sharply from about $2 million to $6.8 million. Wine said initial orders for its 2012 line have been better than expected. "We are looking forward to the upcoming season to build further on our growth and competitive momentum," he said.

Staff writer Dee DePass contributed to this report. Susan Feyder • 612-673-1723

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SUSAN FEYDER, Star Tribune

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