Polaris Industries (NYSE:PII), in a string of positive announcements last night, showed continued momentum and confidence in accelerating consumer spending.
The positive news sent the company’s stock surging 19 percent in early trading, hitting an all-time high of $109 mid-morning.
The Medina-based maker of snowmobiles, ATVs and motorcycles reported stronger than expected first-quarter earnings, raised its outlook for the year and announced it will hang on to its Osceola, Wis., manufacturing plant, originally slated to close.
The company also announced the purchase of the iconic Indian Motorcycle brand and business from two U.K.-based private equity firms for an undisclosed sum. The company said it expects to move manufacturing of Indian motorcycles from North Carolina to Polaris’s Spirit Lake, Iowa, plant. Indian had $11 million in sales in 2010.
In a conference call with analysts and investors, CEO Scott Wine said the strong first quarter exceeds the company’s expectations, boosting the company’s confidence that they “can stay on the gas and drive growth … We remain aggressively focused on making growth happen.”
Wine remains bullish on consumer demand, saying, “We’re not going to be immune from an economic downturn.” He added, however, that the company has “somewhat defied gravity. I think that continues to be the case.”
Polaris President and Chief Operating Officer Bennett Morgan described the ATV or power sports category as “relatively stabilized but still weak.” However, he sees increased consumer spending through 2011, particularly in the first half.
Retail demand in North America “remained strong,” and international sales grew 21 percent. The company also said its international sales benefited from a weaker U.S. dollar. The company opened a new European headquarters to take advantage of market growth for all product lines, citing strong heavyweight motorcycle sales, particularly in Germany and France.
The company also pointed to a $5 million sale of ATVs to Afghan national security forces.
With 40 percent of Polaris engines produced in Japan, the company “has suffered no production interruptions, nor do we expect any.” Morgan said. The company currently has enough engines on hand to support production through May, the company said.
The company reported that record first-quarter net income surged 139 percent to $47.3 million, or $1.34 per diluted share, compared with $19.8 million, or $0.59 per diluted share a year ago. Revenue shot up 49 percent to $537.2 million from last year’s first-quarter sales of $361.7 million.
In a prepared release, CEO Wine said: “We will continue to make prudent strategic investments, and our strong balance sheet, with $346 million in cash on hand and only $200 million in debt at March 31 … gives us the strength and flexibility to remain aggressive in identifying opportunities to accelerate growth.”
He credited “continuous improvement efforts directed at cost reduction and profitability enhancements” for generating “significant margin expansion.” Wine added: In the first quarter, gross margin improved by 210 basis points, and net income margin increased 330 basis points to 8.8 percent of sales.”
The strong start to the year inspired the company to boost the outlook for its 2011 earnings per share to between $5.53 and $5.68 per diluted share, an increase of between 29 and 33 percent over earnings of $4.28 last year. Previously, the company has projected 9 to 13 percent growth over 2010.
Sales are now expected to grow 17 to 20 percent over last year’s $2 billion in revenue. Previously the company had projected 11 percent growth over 2010.
Polaris enjoyed a record year in 2010, coming off the depths of the recession when revenue grew 27 percent and earnings per share shot up 40 percent. The stock had hit an all-time high of $92.42 Friday and has more than doubled over the past 15 months.