Dealer and consumer response to Arctic Cat’s recently launched 50-inch Wildcat Trail, along with current snowfall and snow levels, led to Felt and Company reiterating its BUY rating of Arctic Cat stock today.
Felt and Company analyst Mark E. Smith provided Powersports Business with a research note in which he raises Arctic Cat’s sales estimates for fiscal 2014 and fiscal 2015 to $751.7 million and $818.9 million, respectively, from $743.0 million and $806.8 million. Smith also raised the stock’s price target to $63 from $58.
“ACAT is the first manufacturer to compete with Polaris (PII – BUY) in the trail segment of recreational side by sides. We think this is a great market and are encouraged by the specs of the vehicle and dealer and consumer response,” Smith writes.
“Current snowfall and snow levels are advantageous for ACAT’s snowmobile business, in our opinion. Snow levels through much of the snowmobile country in the northern half of the country as well as Canada have seen snow earlier than a year ago and have current snow depth at or above year-ago levels. We think this is boosting retail sales of snowmobiles, adding new customers and will boost ACAT’s snowmobile sales next year. We note that ACAT’s snowmobile sales typically follow the trend of snowfall from the previous year due to the ordering and manufacturing schedule. We think the early snowfall and better snowmobiling conditions will boost dealer and customer demand for snowmobiles next year as dealer inventories are lowered. Additionally, we think this will boost sales of parts in 2H:F14 as well as garments, two high margin businesses.”
In addition, Smith adds that Arctic Cat’s “new product introductions exceeded our expectations and are well received by dealers and consumers. We think there is significant demand for the ACAT’s new SxS products as well as their snowmobiles. Additionally, favorable weather will boost results in F2014 and F2015, in our view. Our fear that the company may not hit guidance is being assuaged and we think the company will beat current expectations.”