Two Companies Prove the Consumer is Back

The "consumer", especially the US consumer, is known for its outrageous spending habit. Even if they do not have deep pockets, the US consumer finds a way to get the latest and greatest "toy". We saw this malinvestment led to the housing bubble in 2007, followed by the financial crash in 2008, which 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 ol' "consumer". Arctic Cat

and Polaris Industries

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

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 its leading market position in off-road vehicles, and continued gain of market share in motorcycles and snowmobiles. Also attributing to the results, Polaris introduced 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 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%. Further cementing the fact that the consumer has money to spend, and they are spending it. On Thursday morning, Arctic Cat

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 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 Industries is up over 16% on the year, currently trading at $63.68. Arctic Cat is trading over 22% higher on the year, currently trading around $28.49.