Arctic Cat (ACAT) Beats Q1 Earnings and Revenues Estimates

Arctic Cat Inc. ACAT reported adjusted earnings per share of 35 cents in the first quarter of fiscal 2015 (ended Jun 30, 2014), down 12.5% from 40 cents earned in the corresponding quarter last year. Adjusted earnings surpassed the Zacks Consensus Estimate of 31 cents. Net income declined to $3.6 million or 27 cents per share from $5.5 million or 40 cents per share in the year-ago quarter.

Revenues for the quarter ended Jun 30, 2014 increased 18.9% year over year to $143.6 million, beating the Zacks Consensus Estimate of $132 million. The year-over-year improvement was attributable to higher sales in the snowmobiles as well as parts, garments and accessories businesses.

Gross profit increased to $30.8 million or 21.4% of sales from $29.2 million or 24.1% of sales in the year-ago quarter. The year-over-year decline in margin was mainly due to the adverse impact of Canadian currency.

The company recorded a 34% decline in operating profit to $5.6 million from $8.5 million in the year-ago quarter. Operating expense rose to $25.2 million from $20.7 million a year ago.

Segment Results

Revenues from the Snowmobile & ATV business improved 21.3% to $120 million, driven by higher revenues from the Snowmobiles business.

Revenues from the ATV/Side-by-Side business declined 16% to $63.8 million. The decrease was due to the company's efforts to reduce dealer inventory ahead of its September dealer show, where it plans to introduce 14 new models for the 2015 model year. Revenues from the Snowmobiles business surged 149% to $56.2 million from $22.6 million in the prior-year quarter.

Revenues from the Parts, Garments and Accessories business went up 8% to $23.7 million. The increase was owing to sales of newly developed accessories for the new Wildcat Trail model, as well as core ATV accessories.

Financial Position

Arctic Cat had cash and short-term investments of $24.3 million as of Jun 30, 2014, compared with $48.9 million as of Jun 30, 2013. The company had no debt in the reported quarter.

Notably, Arctic Cat repurchased 27,000 shares for $1 million in first-quarter 2015.

Outlook

Arctic Cat expects record high sales in fiscal 2015, driven by the introduction of innovative products and technologies.The company expects revenues between $775 million and $786 million. For the fiscal year ending Mar 31, 2015, Arctic Cat expects earnings per share in the range of $2.25 to $2.35. After excluding severance charge of 8 cents per share, adjusted earnings is expected to be in the range of $2.33–$2.43 per share.

Arctic Cat currently has a Zacks Rank #3 (Hold). Investors interested in the same industry could consider stocks like Marine Products Corp. MPX, Malibu Boats, Inc. MBUU and Polaris Industries, Inc. PII. While Marine Products is a Zacks Rank #1 (Strong Buy) stock, Malibu Boats and Polaris Industries carry a Zacks Rank #2 (Buy).

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