Arctic Cat Misses, Profit Up

Zacks

Arctic Cat Inc. (ACAT) reported a 41.3% rise in earnings per share to $1.30 in the third quarter of fiscal 2013 (ended Dec 31, 2012) from 92 cents in the year-ago quarter. Net income went up 4.8% to $17.9 million from $17 million a year ago. However, the earnings per share missed the Zacks Consensus Estimate by 3 cents.

Revenues for the quarter increased 5.3% year over year to $218 million, missing the Zacks Consensus Estimate of $224 million. The growth was attributable to higher North American sales of Wildcat and Prowler side-by-sides and All-Terrain Vehicles (ATVs).

Gross profit increased 6.3% to $50.8 million or 23.3% of sales from $47.7 million or 23.1% of sales in the year-ago quarter. The increase was attributable to higher sales volume. Operating income climbed 5.7% to $27.7 million from $26.2 million recorded in the third quarter of fiscal 2012.

Segment Results

Revenues from the Snowmobile & ATV business improved 6.9% to $191.9 million, driven by higher revenues from the ATV business, partly offset by a decrease in revenues from the Snowmobiles business.

Revenues from the ATV business surged 27.8% to $69.6 million. The improvement was driven by higher global demand from dealers and distributors for the Wildcat side-by-side. Revenues from the Snowmobiles business declined 2.2% to $122.4 million.

Revenues from the parts, garments and accessories (PG&A) business went down 4.9% to $26 million. The decline was due to a fall in snowmobile garment sales arising from lower-than-expected snowfall. Meanwhile, increase in sales volume of Wildcat parts and accessories had a favorable impact on the segment’s revenues.

Financial Position

Arctic Cat had cash and short-term investments of $96.6 million as of Dec 31, 2012, compared with $76.3 million as of Dec 31, 2011.

Outlook

Arctic Cat expects revenues between $664 million and $684 million for fiscal 2013, representing an annual increase of about 13% to 17%. The company raised its earnings per share guidance from $2.65–$2.75 to $2.75–$2.85. The increased earnings guidance reflects a year-over-year rise of 60%-66%.

Our Take

Arctic Cat makes snowmobiles and ATVs under the Arctic Cat brand name and supplies related parts, garments, and accessories. The company markets its products through a network of independent dealers located throughout the U.S and Canada, and through distributors representing dealers in AK, Europe, Middle East, Asia and other international markets. Currently, it carries a Zacks Rank #4 (Sell).

Smith & Wesson Holding Corporation (SWHC), Sturm, Ruger & Co. Inc. (RGR) and Polaris Industries, Inc. (PII) are performing well in the same industry where Arctic Cat operates. While Smith & Wesson and Sturm, Ruger & Co. are Zacks Rank #1 (Strong Buy) stocks, Polaris Industries Inc. is a Zacks Rank #2 (Buy) stock.
 

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