Shares of ATV and motorcycle manufacturer Polaris Industries Inc. (PII 2.70%) plunged as much as 10.1% in trading Tuesday after reporting a less-than-stellar first quarter. Shares didn't recover much throughout the day and at 2:50 p.m. EDT they were still down 9.7% on the day.
Sales rose 12% in the first quarter to $1.3 billion and net income was $55.7 million, or $1.06 per share on an adjusted basis, which was an increase of 41% from a year ago. Off-road vehicle and snowmobile sales were up 15%, motorcycle sales were up 4% on an adjusted basis, adjacent markets like defense were up 24%, and aftermarket revenue was up 1%.
What seems to have investors a little disappointed was guidance, which was actually increased by Polaris. Revenue growth guidance was increased 100 basis points to 4%-6% and the bottom end of earnings per share guidance was tightened to $6.05-$6.20 per share. But the average estimate from Wall Street is for $5.7 billion in revenue and $6.17 in earnings per share, so compared to the midpoint of guidance the results may not be as good as expected. That's especially concerning when you consider that first-quarter growth of 12% indicates that growth will slow as the year goes on.
At the end of the day, this was both a good quarter and good guidance from Polaris no matter how Wall Street is looking at it. The company is increasing sales in most of its key markets and ATVs, in particular, are seeing a nice recovery from the last few years when recalls negatively impacted sales. The market doesn't seem to be viewing the results as positive today, but with an eye on the long term, I think this is a buying opportunity for investors.