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What: Shares of Arctic Cat (NASDAQ:ACAT) were frozen out by the market this week, falling as much as 20% after the company missed big in its third-quarter earnings report.

So what: The maker of snowmobiles and other recreational vehicles delivered a per-share profit of just $0.89, below estimates of $1.33. Revenue also missed badly, growing just 3.6% to $225.8 million against expectations of $239.4 million. There were some strong points in the earnings release, as sales grew by double-digits in its ATV/side-by-sides and parts, garments, and accessories segments. CEO Claude Jordan acknowledged in a press release that the company had expected the second half of the year to be "challenging," but said he still expected "strong fourth-quarter sales and earnings, which will be driven by our new Wildcat Trail model." Still, due the previous quarter's weakness, the company reduced full-year EPS projections to $2.90-$3.00 from $3.27-$3.37, and lowered its expected revenue range by 2%.

Now what: Despite higher sales, gross margin fell off a cliff this quarter, dropping from 23.3% to 17.8% due to a new agreement with Yamaha that brought in lower-margin sales, which meant EPS dropped all the way from $1.30 last year. The third quarter is one of the two biggest for Arctic Cat so the miss stings particularly sharply. Overall, Arctic Cat does not seem like a broken brand, as it had crushed estimates in its previous report, but investors may want to get used to this kind of volatility from the discretionary-goods maker whose sales are highly dependent on weather and other factors beyond its control.