Wednesday, April 20, 2011

Star of the Day: Polaris Industries (PII)

It has been almost a year since we've discussed Polaris Industries (PII) but it has the market's attention today after a boffo earnings report.  EPS of $1.34 almost doubled analysts' expectations of $0.70, and the company obliterated on the top line too, posting a gain of 47% to $573M v $422M expectation.  That revenue surge might be even more impressive than the EPS beat since you can't massage revenue to the degree you can earnings.  Obviously guidance for the year also went up: $5.53-5.68 vs. $4.86.  The stock is acting accordingly!

Being a company chock full of discretionary items affected by higher gasoline prices, one has to be impressed.  Part of this could be due to the agricultural boom affecting off road vehicles, but it difficult to tell how much.  Full report here.

Via Reuters:

  • Polaris attributed the performance to strong pricing that boosted gross margins and a 55 percent jump in sales of its off-road vehicles. Off-road vehicles, which comprise all-terrain and side-by-side vehicles, are used in recreational activities as well as on farms and construction sites. They account for about 70 percent of Polaris' total revenue.
  • "The side-by-side segment is doing well ... better than the traditional ATV segment. On top of that, Polaris is the leading player in that segment," Longbow Research analyst James Hardiman said.  Side-by-side vehicles, also known as utility task vehicles, are off-road, four-wheel drive vehicles that can carry up to six passengers in addition to cargo. 
  • “Retail demand for Polaris products in North America remained strong throughout the first quarter and we continued to gain market share. Our International business also remained strong with sales increasing 21 percent.”
  • Polaris also significantly improved its margins, with operating expenses dropping from 18.6 percent of sales in the first quarter of 2010 to 16.3 percent of sales this year.

The company is also moving further into the motorcycle market:
  • Separately, Polaris said it acquired North Carolina-based heavy motorcycle maker Indian Motorcycle from U.K private equity firms Stellican Limited and Novator Partners LLP.  The deal will boost Polaris' presence in the heavyweight motorcycle market, where its Victory brand motorcycles are a distant rival of Harley-Davidson.
  • "We will gain access to what we call the die-hard segment where riders look for classic styling and iconic brands. This deal more than doubles the scope of our target market," Chief Executive Scott Wine said on a conference call with analysts.  The on-road vehicle segment currently accounts for about 4 percent of Polaris' total revenue. 

[Jun 14, 2010: Polaris Gets an Upgrade]
[May 25, 2010: Polaris Industries to Move American Jobs to Mexico - Great for Profits and Shareholders; Not so Much for American Workers]

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