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Polaris boosts full year outlook on strong Q3 results, cuts margin forecast

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Polaris Industries (NYSE:PII) announced Tuesday an increase to its full year earnings and revenue outlook as the company posted third quarter results that beat Street estimates, but shares still fell on a grim margins forecast.

The Medina, Minnesota-based company, which makes off-road vehicles, snowmobiles and motorcycles, said it now expects full year earnings in the range of$3.10 to $3.16 per share, representing an increase of between 45 and 48 percent over the $2.14 it earned last year.

Revenues are now expected to rise between 30 and 32 percent over 2010's $1.99 billion. This represents a range of $2.59 billion to $2.63 billion in sales.

CEO Scott Wine commented: "Looking ahead to 2012, we expect the overall economic climate to remain challenging. However, we believe our business is well positioned to offset these headwinds, as we continue to execute our successful long-term strategy, invest in product innovation, and seize additional opportunities to sustain our momentum.

"While our current success means the sales and earnings comparisons will be much tougher in 2012, at this early stage we expect to have another year of increasing sales, net income and earnings per share."

Still, investors elected to take profits, as the company cut its full-year margin outlook on rising commodity costs and currency fluctuations, sending the stock down 7.4 percent to $54.17, as of 2:08 pm EDT.

Polaris said it now expects annual gross margins to grow 140-160 basis points, down from its prior forecast of 220 basis points.

For the three months ending September 30, the company posted earnings of $67.6 million, or $0.95 per share, up 43 percent from $47.2 million, or $0.69 per share, a year ago.

Revenues rose 26 percent to $729.9 million, as increased volumes and higher prices offset increased commodity costs.

"Each of our businesses experienced strong sales growth in the period, primarily driven by sustained market share gains," Wine added.

Sales of Polaris' core off-road vehicles segment, which includes all-terrain vehicles (ATVs) and side-by-side vehicles, increased 25 percent, reflecting significant North American market share gains, the company said.

On-road vehicle sales increased by 77 percent, largely on increased sales of Polaris' Victory motorcycles. Sales related to the company's April acquisitions of Global Electric Motorcars (GEM) and Indian Motorcycle Company were recorded this quarter, also boosting sales.

Meanwhile, snowmobile sales increased 23 percent during the quarter, as dealers reduced inventories and the company sold more higher-priced units. Meanwhile, parts, garments, and accessories sales increased 21 percent.

Gross margins gained 230 basis points during the quarter, rising to 28.3 percent, from 26.0 percent in the third quarter of 2010.

The company's stock is up 38.43 percent in the year to date.

Quick facts: Polaris Industries

Price: 85.87 USD

NYSE:PII
Market: NYSE
Market Cap: $5.26 billion
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