Polaris Ranger XP 900 helped drive overall sales in the second quarter of 2013

Polaris Industries just announced their Q2 2013 financial results and reported another quarter of strong earnings and market share gains. The following are the highlights of the earnings call with analysts with a focus on the STOV segments.

• Sales for the second quarter increased 12%, to a record $844.8 million driven by share gains and double-digit retail growth in North America
• Polaris captured market share in ATVs and side-by-sides which also drove significant gains in PG&A business
• Second quarter net income rose 15% to $80 million yielding record earnings per share of $1.13, a15% improvement over the prior year period.
• PG&A sales increased 33% for the quarter
• ORV segment which includes ATVs and UTVs  performed well fueled by the RANGER 900 XP and supported by RZR products.
• Revenue for ORV was up 7%, which is less than retail as inventory was reduced in preparation for new model launches.
• Gained North American market share in both ATVs and side-by-sides.
• North American side-by-side retail sales strengthened in the second quarter, up double-digits percent driven by growth in both RANGER and RZR categories. In fact, both brands had their largest unit retail quarters in their history.
• Management estimates the North American side-by-side industry also improved, growing just under 10% in the second quarter and is now up upper-single digits year-to-date.
• Initial Brutus shipments began into over 400 Polaris commercial dealers.
• In the military segment Polaris remains the clear #1 in ultralight tactical vehicle space with the new MRZR is selling well globally
• Due primarily to the Aixam purchase and contributions from GEM and Goupil, small vehicle revenues increased $22 million and 190% for the second quarter. Year-to-date, sales are up 109%.
• GEM business is improving with second quarter retail sales were up in excess of 50%. Management reports better operations for GEM and improved traction in the B2B market place, particularly in the People Mover sub-segment.
• Goupil also had a strong second quarter with orders up over 30% and notable cost and productivity improvements in operations, driving gross margin improvements.
• ORV PG&A sales increased 25% and small vehicles 165%.  “The attachment rate that we’ve seen on the Ranger 900 XP with the new integrated cab system is phenomenal.”
• In Europe – Polaris’ Q2 ORV retail grew and year-to-date, is about flat in an ORV industry that remains down double digits. Polaris maintains their leading position.

Looking ahead:

• Future Sales of Off-Road Vehicles are expected to increase in the 8% to 10% range with retail sales of side-by-side vehicles and ATVs outpacing the overall market in North America and internationally
• ORV market share is expected to continue to increase in 2013
• For small vehicles, which includes the GEM and Goupil businesses, along with the recently acquired Aixam Mega, sales are expected to increase well over 100% for the full year 2013.
• Both GEM and Goupil are expected to increase sales for the full year over last year total company sales increase in the range of 13% to 15% for the full year 2013.
• Management is not feeling pricing pressure in the UTV market as they are confident that the Polaris brand/product can garner a price premium
• Process improvement in small vehicle operations are improving quality and delivery as well as reducing costs. Management feels they are positioned very well in this space for strong growth.
• The Bobcat dealer network has lagged Polaris in the commercial utility segment and the sell through of the Brutus vehicles will be slower than consumer vehicles because of the slower commercial vehicle buying cycle.
• Management was even more upbeat than usually about the 2014 models that will be announced at the dealer meeting in a few days.

Learn more:  Seekingalpha.com (Earnings call transcript)

Comment:  Polaris management continues to execute on their strategic plans very well. They are setting the industry standard for inventory management, operational efficiency and product development and innovation. In an increasingly competitive market it will be interesting to see what features and innovations their new models will have.