Polaris Industries Inc.

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.

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