The Sportsman ACE, one of the many different vehicles that helped drive record quarterly performance for Polaris.

Polaris Industries reported record second quarter results with sales of $1.014 billion and net income of $96.9 million. Sales increased 20% from Q2 2013 and net income 21%. Key drivers were an increase of 15% in North American retail sales with strength in ORV and motorcycle products. Management also raised their full year guidance to a 16-18% increase revenue. Here are some highlights from the earnings call with a focus on small, task-oriented vehicles:

• ORV sales increased 13% for the quarter to $701.5 million
• Guidance for full year:  up 11%-13%
• Side-by-side sales up low teens % and outpaced the market
• Polaris gained market share in side-by-sides and ATVS
• Sportsman ACE is selling well and customer data to date indicates that it is reaching a new market segment
• New ORV models will be announced shortly
• Promotion environment for side-by-sides remains aggressive
• Small Vehicle sales increased 29% to 43.5 million
• Aixam Mega sales up over 40% in Q2
• GEM and Goupil sales combined increased 6%
• New products will be announced in the second half of the year
• Small Vehicle sales guidance for the year:  up 25%-30%
• In the commercial segment Brutus sales are below expectations as the company tackles the B2B sales process but Bobcat and National Account sales did well.
• International sales increased 29% in Q2 to $170.5 million driven, in part, by side-by-side sales in many regions

Learn more:  Seekingalpha.com (Earnings call transcript)

Comment:  Polaris continues to operate on nearly all cylinders and will be shortly rolling out new products. Their only weakness appears to be in the commercial segment. It is telling that Bobcat and national accounts did well in the quarter but the Brutus  retail sales, while improving, remained below expectations. This points to the continuing mismatch between the majority of Polaris’s distribution network and the commercial customer the Brutus is targeting. Most of their current dealers are accustomed to a different consumer-oriented sales process. Management is likely to pursue additional marketing partnerships in this segment to bolster commercial sales while trying to assist, train and bring more of their traditional dealers up to speed in this segment. But this is nitpicking, the company continues to roll in competitive markets and is even exceedng high expectations.