Maker of snowmobiles, Arctic Cat (ACAT, Financial), managed to beat the Street in the recent quarter. However, the company saw its shares go the wrong way as it failed to come up with a bright outlook.
Let’s take a look at how the company might perform in future.
A look at the performance
The increase in revenue was mainly because of strong demand for its ATVs and its all new Wildcat vehicles. Another driver for the ATV sales was the growth in international business. Arctic Cat’s ATV sales for the quarter were up 58% from last year, coming in at $75.8 million in the quarter. Even snowmobile sales surged on account of increased volumes though an increase in sales incentives had a negative impact.
The company also witnessed growth in its prowler side by side business because of the launch of HDX heavy-duty utility vehicle.
Hitting a bump
Despite everything about the company being good this quarter Arctic’s share price fell after its results were out. The reason for the same was lower than expected outlook, projecting earnings of $2.4 to $2.5 per share for the coming year. The EPS estimate is not only below investor expectations but also below many of its competitors’ EPS estimate such as Polaris Industries (PII). But, we need to look beyond just one quarter and see what lies in store for Arctic Cat.
Innovation: The key driver
The major contributors to Arctic’s revenue were its innovative and new products which were launched in the year. The Plymouth based company launched 23 new models in the Snowmobiles segment during the year. Though the snow conditions were not very good in North America, the new snowmobile models attracted customers to the segment. The company also changed its pricing and product mix which pushed the sales in the industry. The increase in ATV and snowmobiles sales had a positive effect on the revenue from accessories sales for the same including ATV parts and garments.
Planning for the future
Arctic Cat plans to continue to invest largely in product development going forward. The company is expected to do well in the coming months since it is on the verge of launching 5 new models for its snowmobile industry segment. These 5 new models along with the 23 new models launched this year are expected to help it in increasing its market share.
The takeaway
So, what else can be asked for? The snowmobile maker is in the growth mode, is improving its performance and has been launching new products. Adding to that is the company’s plans to manufacture its snowmobile engines by its own from the year 2015 which will further improve its profitability by decreasing costs. Therefore, it would make sense to keep an eye on this Cat and see how it fares going ahead.
