UPDATE 3-Arctic Cat sees wider loss, stock drops

(Adds analyst comment, paragraphs 8-9)

CHICAGO, Jan 4 (Reuters) - Arctic Cat Inc (ACAT.O) on Friday warned of a wider-than-expected quarterly loss and a drop in full-year earnings, citing a shortfall in sales of all-terrain vehicles (ATV), sending shares to their lowest level since 1999.

Arctic Cat already expected a net loss in its third quarter ended Dec. 31 mainly due to reduced production of snowmobiles and widened that expected loss, citing an industrywide decline in ATV sales.

The Thief River Falls, Minnesota-based company plans to cut annual ATV production by about 10 percent in its fiscal fourth quarter ending March 31 reflecting weaker demand.

Arctic Cat, which expects to report results on Jan. 23, said ATV retail sales were in line with the market overall, which has seen sales slow in all segments except for modest gains on large-displacement engines.

The company expects a third-quarter net loss of 55 cents to 60 cents per share, compared with its prior net loss view of 30 cents to 37 cents per share.

Third-quarter net sales are estimated at $155 million to $160 million, down from its earlier forecast of $170 million to $180 million, Arctic Cat said.

Analysts on average were looking for a third-quarter loss of 31 cents per share on sales of $176 million, according to Reuters Estimates.

Arctic Cat shares were down $3.01, or 25 percent, at $9.18 in late trading on the Nasdaq.

Wedbush Morgan Securities analyst Rommel Dionisio cut his price target on the stock to $10 from $15.

"We believe market share gains from key competitor Polaris Industries, the No. 2 player in the ATV market behind Honda, was also an important reason for Arctic Cat's disappointing performance," Dionisio wrote in a research note.

Arctic Cat expects full-year earnings of 1 cent to 7 cents per share, versus its earlier forecast of 89 cents to 95 cents per share and Wall Street's estimate of 67 cent.

The company, which said it has no long-term debt and remains in strong financial condition, also plans a new $10 million stock buyback. (Reporting by David Bailey and Nick Zieminski in New York; Editing by Derek Caney, Leslie Gevirtz)