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Polaris Industries Inc. (PII) recently delivered its 20th consecutive positive earnings surprise. And management once again raised its sales and EPS guidance going forward.

This prompted analysts to revise their estimates higher for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy).

In addition to strong growth potential, the company pays a dividend that yields a solid 1.9%.

Company Description

Polaris is a leader in the powersports industry. The company manufactures off-road vehicles (ORVs), including all-terrain vehicles (ATVs) and snowmobiles, and on-road vehicles, including motorcycles and electric powered vehicles.

The company is headquartered in Medina, Minnesota and has a market cap of $5.6 billion.

First Quarter Results

Polaris delivered another impressive quarter with earnings per share coming in at 85 cents, beating the Zacks Consensus Estimate of 78 cents. This was a 27% increase over the same quarter last year.

Net sales soared 25% to $673.8 million, well ahead of the Zacks Consensus Estimate of $617.0 million. This was driven by continued strength in the North American off-road vehicle and motorcycle industries.

Gross profit expanded 60 basis points to 28.9% of sales, while operating income also improved 60 bps to 13.6%.

Outlook

Following stellar Q1 results, management raised it guidance for the remainder of 2012. The company now expects 2012 EPS between $3.85 and $4.00 on sales growth of 10-13%. This is up from previous guidance of $3.65-$3.80 per share on 5-8% sales growth.

This prompted analysts to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy).

The Zacks Consensus Estimate for 2012 is now $4.06, above guidance, and representing 27% growth over 2011 EPS. The 2013 consensus estimate is currently $4.84, corresponding with 19% growth.

Dividend

In addition to strong growth, Polaris offers a dividend that yields a solid 1.9%. The company has been aggressively raising this as business continues to boom, including a whopping 64% increase earlier this year.

Valuation

Shares of Polaris have soared 30% since I originally wrote about it back on October 26, and are up 12% since I last wrote about it on March 30.

This has led to an increase in valuations, but they are still not unreasonable. The stock trades at 19x 12-month forward earnings, a premium to the industry median of 11x. But this seems justified given Polaris's above-average earnings growth.

The Bottom Line

With estimates still rising, strong earnings growth projected, a solid 1.9% yield and reasonable valuation, Polaris still offers investors attractive upside potential.

Read the March 30 article here.

This Week's Growth & Income Zacks Rank Buy Stocks:

Badger Meter, Inc. (BMI) delivered strong first quarter results, prompting analysts to revise their estimates significantly higher for both 2012 and 2013. This sent the stock to a Zacks #2 Rank (Buy). Analysts believe that demand for Badger Meter's products has turned a corner, and this should drive strong growth over the next few years. In addition, the company has been steadily increasing its dividend. It currently yields a solid 1.7%. Read the full article.

Parker Hannifin Corporation (PH) delivered record quarterly earnings, with EPS coming in at $2.01, well ahead of the Zacks Consensus Estimate of $1.72. And management raised its guidance above the current consensus estimate for the remainder of its fiscal 2012. It is currently a Zacks #2 Rank (Buy). In addition, the company raised its dividend for the second consecutive quarter. It yields a solid 1.9%. Read the full article.

Estimates have been rising for WD-40 Company (WDFC) after it beat the Zacks Consensus Estimates on both the top and bottom lines, and management provided 2012 guidance above consensus. It is a Zacks #2 Rank (Buy). It also pays a dividend that yields a solid 2.7%. Read the full article.

Southwest Gas Corporation (SWX) offers investors solid growth and income at a reasonable price. And estimates have been steadily rising after the company delivered a big beat for the fourth quarter. It is a Zacks #1 Rank (Strong Buy) stock. Read the full article.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

 
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