Given its consistent positive earnings surprises, Arctic Cat (ACAT – Snapshot Report) is a solid momentum play. This Zacks #1 Rank (Strong Buy) stock also hit its 52-week high last month.
In January 2012, this snowmobile and all-terrain vehicle maker reported solid third-quarter fiscal 2012 results, including earnings per share of 92 cents that trounced the Zacks Consensus Estimate by 59%.
Sales shot up 36% year over year to $207 million, crushing the Zacks Consensus Estimate of $182 million. Snowmobiles sales alone jumped 61% in the quarter.
Higher volume, better product mix and favorable pricing contributed to a 154 basis points (bps) year-over-year rise in gross margin that touched 23.1% in the quarter. Operating profit jumped 114% year over year to $26.2 million.
Based on the strong quarter, Arctic Cat raised its guidance for fiscal 2012 and remains optimistic that new models will boost its snowmobile retail revenues. The company now expects sales to range between $568 million and $575 million, an estimated year-over-year surge of 22%-24%. The earlier forecast was between $530 million and $545 million.
Arctic Cat raised its earnings per share target to between $1.60 and $1.70 from the prior view of $1.10 to $1.15. Moreover, it forecasted gross margin to improve between 20 and 60 bps in fiscal 2012.
Positive Estimate Revision
For fiscal 2012, the Zacks Consensus Estimate currently stands at $1.69 a share, near the top-end of the company’s upwardly revised guidance range for the year. This represents an estimated annualized growth of roughly 141%. The Zacks Consensus Estimate of $2.70 per share for fiscal 2013 represents an estimated year-over-year growth of nearly 60%.
For fiscal 2012, two estimates out of six total have been revised upward over the last 30 days. There have been three upward revisions for fiscal 2013 over the similar period.
Attractive Valuation and Compelling Technicals
Arctic Cat is currently trading at a forward P/E of 17.2x. This represents a 4% discount when stacked up with the peer group average of 18x. Moreover, the stock has a 1-year ROE of 14.9%, higher than its peer group average of 10.3%.
Article courtesy of forbes.com