2 Companies That Prove The Consumer Is Back

Includes: ACAT, PII
by: Benzinga

By Brandon Pilzner

The consumer, especially the US consumer, is known for its outrageous spending habits. Even if it does not have deep pockets, the US consumer finds a way to get the latest and greatest toy. We saw this malinvestment lead to the housing bubble in 2007, and then the financial crash in 2008, which finally led consumers to think differently about spending and focus more on saving.

With the economy finally starting to show signs of renewed life, two companies are benefiting from the good old consumer in particular.

Arctic Cat (NASDAQ:ACAT) and Polaris Industries (NYSE:PII) both posted strong quarterly results within the past week, with snowmobile sales increasing over 60% year-over-year. Both companies design, engineer, manufacture and market snowmobiles and all-terrain vehicles to consumer markets.

On Tuesday, Polaris reported fourth quarter earnings of $0.90 per share on revenues of $782 million. The Street was expecting earnings of $0.89 per share on revenues of $752.7 million.

The strong quarter was attributed to Polaris's leading market position in off-road vehicles and continued gain of market share in motorcycles and snowmobiles. Also attributing to the results was Polaris's introduction of over 20 new vehicles, which included award-winning products like the RANGER RZR 570 value recreational off-road vehicle, the 800 Pro-RMK snowmobile, and the Victory Cross Country Tour motorcycle.

Commenting on business going forward, CEO Scott Wine said, "We anticipate further growth and market share gains in our core businesses, while maintaining our focus on expanding our gross and net margins while expanding our investments for future growth and profitability."

This is great news for the US economy. Even with oil near or above $100 per barrel and a shaky global economy, consumers do not seem to care. Polaris's overall ATV sales increased 18% year-over-year, snowmobile sales rose 63%, and on-road vehicle sales jumped 69%. This further cements the fact that consumers have money to spend, and they are spending it.

On Thursday morning, Arctic Cat reported third quarter earnings of $0.92 per share on revenues of $207 million. The Street was expecting earnings per share of $0.59 on revenues of $181.8 million.

Commenting on Arctic Cat's positive results, CEO Claude Jordan said, "We are very pleased with the company's strong third-quarter and year-to-date performance. Arctic Cat continued to execute well during the quarter, producing double-digit sales and earnings gains."

Arctic Cat's overall ATV sales increased 12% year-over-year and snowmobile sales rose 61%. Arctic Cat expects even higher snowmobile retail sales in fiscal 2012 due to its new model line-up. The company also anticipates continued gains in its ROV business, fueled by the competitive strength of the Prowler side-by-side offerings and the growth potential for the Wildcat pure-sport ROV model.

Benzinga recently spoke to James Hardiman, recreational equipment analyst at Lowbow Research, for his take on the quarter.

"The large increase in snowmobile sales in both companies is attributed to heavy snowfall at the end of last season, where dealers sold off existing inventory," Hardiman said. "We believe both companies gained market share. However, the risk going forward is the awful snowfall this season.

"ATV sales increased mainly due to new products, which continued to drive market share," Hardiman continued. "To a certain degree, an increase in consumer disposable income added to ATV sales."

Polaris is up over 14% on the year, and is currently trading at $64.10. Arctic Cat is trading over 30% higher on the year, and is currently trading at $30.46.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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