UPDATE 3-Off-roaders power Polaris results; shares hit new high

Wed Apr 20, 2011 12:57pm EDT

* Q1 EPS $1.34 vs est. $0.70

* Q1 revenue up 49 pct to $537.2 mln

* Raises 2011 EPS view to $5.53-$5.68

* Sees 2011 sales up 17-20 pct

* Shares rise 27 pct to a new high (Adds analyst, conference call comments; updates share movement)

By Bijoy Anandoth Koyitty

April 20 (Reuters) - Increased spending by Americans on rugged off-road vehicles used in farms and thrill-seeking sports helped Polaris Industries Inc report its highest ever first-quarter profit and raise its outlook for the year.

The strong results pushed shares of the company up as much as 27 percent to a new life-time high. The broader Dow Jones U.S. Recreational Products Index rose 9 percent, while shares of rival Arctic Cat Inc were up 8 percent.

Polaris, which is also known for its snowmobiles and heavyweight motorcycles, attributed the performance to strong pricing that boosted gross margins and a 55 percent jump in sales of its off-road vehicles.

Off-road vehicles, which comprise all-terrain and side-by-side vehicles, are used in recreational activities as well as on farms and construction sites. They account for about 70 percent of Polaris' total revenue.

"The side-by-side segment is doing well ... better than the traditional ATV segment. On top of that, Polaris is the leading player in that segment," Longbow Research analyst James Hardiman said.

Side-by-side vehicles, also known as utility task vehicles, are off-road, four-wheel drive vehicles that can carry up to six passengers in addition to cargo.

"It is an improving economy. People are a little bit more willing to put their discretionary dollars to work," Hardiman said.

The U.S. agricultural economy is the healthiest in years as rising farm income allows farmers to pay off debt and buy land and machinery to meet booming demand for crops and livestock. [ID:nN15299410]

For 2011, Polaris expects earnings of $5.53-$5.68 a share, up from its prior view of $4.65-$4.85 a share. It expects gross margins to increase by up to 90 basis points over last year's 26.6 percent.

ON A BIKING TRIP

Separately, Polaris said it acquired North Carolina-based heavy motorcycle maker Indian Motorcycle from U.K private equity firms Stellican Limited and Novator Partners LLP.

The deal will boost Polaris' presence in the heavyweight motorcycle market, where its Victory brand motorcycles are a distant rival of Harley-Davidson .

"We will gain access to what we call the die-hard segment where riders look for classic styling and iconic brands. This deal more than doubles the scope of our target market," Chief Executive Scott Wine said on a conference call with analysts.

The on-road vehicle segment currently accounts for about 4 percent of Polaris' total revenue.

Polaris competes with the likes of Yamaha Motor Co , Honda Motor Co , Suzuki Motor Corp , Bombardier Recreational Products and Deere & Co in various segments.

Shares of the company were up 25 percent at $114 in heavy trade, making the stock the biggest gainer on the New York Stock Exchange. (Reporting by Bijoy Koyitty in Bangalore; Editing by Prem Udayabhanu and Saumyadeb Chakrabarty) (bijoy.koyitty@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: bijoy.koyitty.reuters.com@reuters.net))

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