Sales up, losses up. Sales up, profits down.
That pretty much sums up the quarterly and annual results that ATV- and snowmobile-maker Arctic Cat
But if the news was so bad, why is the stock up nearly 6% as we close out the week? Let's find out.
A tale of two kitties
The reason Arctic Cat's stock is soaring, it seems to me, is one of two things. Either investors allowed themselves to be wowed by full-year earnings projections that exceeded expectations, or the other thing, which I'll get to in a moment. The "guidance" theory goes like this: Arctic Cat aims to reduce its snowmobile production by 30% this year, to allow demand to catch up with dealer inventory already in the pipeline.
That cutback in production will hurt sales comparisons in the current, first fiscal quarter, as the firm expects to sell no more than $80 million worth of product, and perhaps double last year's Q1 loss to $0.47 per share. However, thanks to that other reason, Arctic Cat expects ATV sales to put it back in black by year-end, contributing to full-year sales of as much as $736 million, and full-year profits which may reach $0.95 per share.
Now for the mysterious other reason to be bullish on Artic Cat. In a word, it's market share. (OK, two words.) You see, unlike rival Polaris
Simply put, with Polaris reporting declining sales, and Arctic Cat reporting the opposite, it looks like the latter is chowing down on the former's lunch. Reason enough to raise the price of the latter's shares by 6%? Yes, I think it is.
Check out the competition with:
- Wear a Helmet With Polaris
- Polaris Rides On: Fool by Numbers
- Foolish Forecast: Polaris Launches a New Year
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Fool contributor Rich Smith does not own shares of either company named above.