Polaris Industries Inc. (PII) recently delivered its 19th consecutive positive earnings surprise on record quarterly sales.
And management provided a bullish outlook for 2012, prompting analysts to revise their estimates higher. It is a Zacks #2 Rank (Buy).
The company also recently hiked its dividend by 64%, marking the 17th consecutive annual increase. It yields a solid 2.1%.
Polaris is a leader in the powersports industry. The company manufactures off-road vehicles (ORVs), including all-terrain vehicles (ATVs) and snowmobiles, and on-road vehicles, including motorcycles and electric powered vehicles.
The company is headquartered in Medina, Minnesota and has a market cap of $5.0 billion.
Fourth Quarter Results
Polaris reported fourth quarter earnings per share of 90 cents, a penny ahead of the Zacks Consensus Estimate. This was a 15% increase over the same quarter in 2010.
Sales jumped 26% to a record $782.0 million, well ahead of the Zacks Consensus Estimate of $753.0 million. This was driven by double-digit revenue growth in each product line, including a 63% increase in Snowmobiles and a 69% increase in Road/Victory Motorcycles.
Gross profit as a percentage of sales did decline a bit, however, from 27.7% to 26.1%. But this was somewhat offset by the leveraging of its fixed operating expenses.
Overall operating income rose 19% as the operating margin slipped 70 basis points to 11.9%.
Management provides an encouraging outlook for 2012, stating that it anticipates 'further growth and market share gains in [its] core businesses, while maintaining [its] focus on expanding [its] gross and net margins.'
The company expects to earn between $3.65 and $3.80 per share on 5-8% sales growth, with sales increases in each product line and geographic location except snowmobiles.
This prompted analysts to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy).
The Zacks Consensus Estimate for 2012 is now $3.88, above guidance, and representing 21% growth over 2011 EPS. The 2013 consensus estimate is currently $4.56, corresponding with 18% growth.
Big Dividend Increase
Management seems confident enough in its long-term business prospects to recently raise its dividend by a whopping 64%. This marked the 17th consecutive annual dividend hike.
It currently yields a solid 2.1%.
Although shares of PII are up more than 16% since I last wrote about it on October 26, valuation still looks reasonable.
Shares trade at 18x 12-month forward earnings, a premium to the industry median of 16x. But this seems justified given Polaris's above-average earnings growth.
The Bottom Line
With estimates still rising, strong earnings growth projected, a solid 2.1% yield and reasonable valuation, Polaris still offers investors a lot to like.
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