Update: Arctic Cat Earnings

| About: Arctic Cat (ACAT)


For fiscal 1Q 2015 the company beat on the top and bottom lines.

This was in line with our expectations, with the harsh winter being a benefit.

We still see Arctic as an underfollowed and undervalued stock.

Arctic Cat (NASDAQ:ACAT) posted fiscal 1Q results that beat earnings by nearly 10% and revenue by over 7%. EPS came in at $0.35 excluding the severance charge (besting $0.32 consensus). It showed mixed results in its two key segments. While ATV sales were down 16% y/y to $63.8 million, snowmobile sales jumped 149% to $56 million. For the full year fiscal 2015, Arctic Cat guided for earnings to come in between $2.25 to $2.35 ($2.33 to $2.43 without the severance charge), which is on the low end of the previous consensus of $2.47.

However, as we've noted before, Arctic is a multi-year story. The interim results might be lumpy, but it has the balance sheet to continue funneling money into R&D and possibly become more shareholder friendly with dividends and buying back its cheap stock. We profiled Arctic just last month, outlining what we saw as a couple of key catalysts,

The market doesn't appear to be appreciating Arctic Cat's ability to expand overseas, nor the company's lineup for 2015. The company, and its dealers, are excited by the rollout of new products in 2015...They'll be launching 13 new snowmobiles this year, compared to 10 last year. The company is also having its first ATV show since 2008 later this year. With the help of continued product development, more floor space at dealerships and a push to international markets, Arctic Cat should be able to hit its goal of $1.2 billion in revenue before fiscal 2019. That'll be nearly 65% growth in revenue from what it posted in 2014.

Our summary from our June article:

  • This recreational focused small-cap had been beaten down of late, getting slammed again last week.

  • Shares are now trading well below peers and look to be in deep value territory, and there's a small dividend to protect on the downside.

  • With a suite of new products and international expansion, the upside could be as high as 40% in the interim.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.