Polaris Wheels Out Growth

My parents swear to me that there was more snow than they wanted this past winter in New England, but according to its first-quarter earnings announcement last week, all that snow didn't help Polaris Industries (NYSE: PII) much. It needed more snow across the northern Midwest, where the company derives a larger portion of its snowmobile sales.

On the bright side, snowmobiles make up a small 3% of Polaris' overall sales. All-terrain vehicles, motorcycles, international sales, and parts, garments, and accessories are the other four product lines that are the bulk of sales, and all four showed solid growth. Combining them gives total sales growth of 9% to go with earnings growth of 11%.

Unfortunately, it's difficult to go much deeper than that, as Polaris provides only limited balance sheet data and no statement of cash flows with its earnings release (tsk-tsk!). I guess we'll all have to wait for the 10-Q to be posted to the Securities and Exchange Commission website. While I always like to see at least a complete balance sheet with an earnings release, I've looked at Polaris' SEC filings in the past and have found them to be chock-full of info.

Foolish colleague Richard Gibbons had a great write-up including Polaris a little over a week ago, and he picked up on many of the things I saw in Polaris last year, when shares traded about 50% lower than they do now. Unlike Richard, I never picked up the shares, but I keep the company on my watch list because its Victory motorcycle division intrigues me.

It may seem like a bit of a stretch for a company that sells ATVs and snowmobiles to venture into motorcycles and onto the turf of Harley-Davidson (NYSE: HDI) and Honda (NYSE: HMC). But at a very basic level, all three products require small motors, and that's one of Polaris' core competencies. The secret to success is in styling, build quality, and development of the Victory brand. Polaris seems to be slowly advancing on all three fronts, taking in $23 million in sales last quarter, up 12%.

Shares of Polaris are 22% off the highs of a few months ago and were down 13% in the past few days. With a history of strong performance and a dividend yield around 2%, the shares are more intriguing then they have been in almost a year. That said, keep a close eye on Polaris' inventory levels because they have been creeping up lately, and while I think management knows how to handle this, the rising inventories may cause the wise to panic and offer the shares at a greater discount.

Fool contributor Nathan Parmelee has no financial interest in any of the companies mentioned.