Arctic Cat’s Stock Dives On Lower Profits

The recreational vehicle company’s stock dropped more than 15 percent Thursday morning after its earnings fell well-below Wall Street expectations for the company's second quarter.

Arctic Cat’s stock plummeted Thursday morning after it reported lower second-quarter earnings. The company said it is bracing for a “challenging” second half of the year, although it maintained its full-year outlook.
 
Thief River Falls-based Arctic Cat announced that net earnings for the second quarter, which ended September 30, totaled $23.4 million, or $1.70 per share, down about 6 percent from $25 million, or $1.80 per share, during the same period in 2012. Earnings per share were $0.26 lower than what analysts polled by Thomson Reuters had expected.
 
Revenue, meanwhile, totaled $238.5 million, up 4 percent from $229.0 million in the second quarter of 2012. Despite the increase, second-quarter revenue fell short of analysts’ projections of $251.6 million.
 
Shares of Arctic Cat stock were trading down about 15.5 percent at $49.10 during Thursday morning trading.
 
The company designs, manufactures, and markets all-terrain vehicles (ATVs), off-road “side-by-side” vehicles, and snowmobiles.
 
“We had strong double-digit sales gains in side-by-sides and snowmobiles that led to record second-quarter sales, on top of a record prior-year period,” Chairman and CEO Claude Jordan said in a statement. “However, ATV sales in North America and Europe fell short of our expectations in the quarter, and the lower volume reduced our profitability.”

Arctic Cat said sales of its Wildcat and Prowler HDX side-by-side vehicles and its snowmobiles drove its uptick in revenue. It also announced plans to introduce two new Wildcat side-by-sides in November, as well as the Wildcat 50 Trail model in the fourth quarter of this year.

According to Jordan, the company saw strong sales gains for its ATV and side-by-side business on the retail side, but its sales to dealers was lower than anticipated.

Arctic Cat is sticking with its sales and earnings guidance of $3.27 to $3.37 per share for its full fiscal year, but it is now targeting the lower end of that range.

“We are maintaining our full-year outlook for fiscal 2014, but expect a challenging second half of the year,” Jordan said. “Based on our first-half results and prospects for the balance of this fiscal year, we remain confident that we will achieve another year of increased sales, record earnings, and enhanced shareholder value.”
 
Arctic Cat competitor Medina-based Polaris also recently released its financial results. Polaris’ quarterly sales eclipsed $1 billion for the first time in company history.