Polaris Industries Inc. (PII): Zacks Rank Buy

Zacks

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%.

Company Description

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%.

Bullish Outlook

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%.

Valuation

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.

This Week's Growth & Income Zacks Rank Buy Stocks:

GameStop Corp. (GME) recently delivered better than expected fourth quarter results and provided encouraging 2012 guidance. This prompted analysts to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy). Although growth has slowed at this once-hot retailer, analysts still project 9.5% long-term EPS growth. On top of this, the company pays a dividend that yields a solid 2.6%. And valuation is attractive with shares trading at less than 8x forward earnings. Read the full article.

Dover Corporation (DOV) offers investors strong growth and solid income at a very reasonable price. The company recently delivered its 11th consecutive positive earnings surprise, prompting analysts to revise their estimates higher. It is a Zacks #2 Rank (Buy). Dover has also been rewarding shareholders through stock buybacks and dividend increases. It currently yields 2.0%. Valuation is attractive too, with shares sporting a PEG ratio of 1.0. Read the full article.

Fred's, Inc. (FRED) delivered better than expected fourth quarter results and provided bullish guidance for 2012 on March 21. This prompted analysts to revise their estimates higher for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy). On top of strong earnings growth, Fred's offers investors a dividend that yields a solid 1.6%. And valuation looks attractive with shares trading well below the industry median on both a price to earnings and price to book value basis. Read the full article.

Prudential Financial, Inc. (PRU) reported solid fourth quarter results on February 8, prompting analysts to revise their estimates higher. Analysts project strong earnings growth from Prudential over the next few years, but despite this, shares trade at less than 9x forward earnings. The company has also been aggressively buying back its stocks and pays a dividend that yields 2.3%. Read the full article.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

POLARIS INDUS (PII): Free Stock Analysis Report

Zacks Investment Research



More From Zacks.com
View Comments (0)