Douglas Dynamics Inc.'s Earnings Plow Higher Despite Weak Snowfall Totals

By Matthew

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While this past winter produced some of the lowest snowfall totals in the last 10 years, that didn't dent enthusiasm for Douglas Dynamics' (NYSE: PLOW) products. Instead, pre-season orders have been robust, driving record second-quarter results for the company. Because of the strong start to the year, the company is pushing its full-year guidance higher.

Douglas Dynamics' results: The raw numbers

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YOY = year over year. Data source: Douglas Dynamics Inc.

What happened with Douglas Dynamics this quarter?

Strong pre-season sales drove financial results:

  • Revenue plowed higher as a result of stronger pre-season sales of snow and ice control equipment. Typically pre-season sales are split evenly between the second and third quarter, however, this year the company sees those sales skewed toward the second quarter.
  • The company did experience slightly weaker sales of parts and accessories due to low snowfall totals in 2016 compared to the historical averages.
  • The robust pre-season sales certainly helped drive the company's earnings growth. However,lower commodity prices and an improvement in the company's performance through its proprietary Douglas Dynamics Management System (DDMS) boosted margins from 34.5% of netsales to 36.5%.
  • Cash flow from operating activities jumped 172.1% to $28.3 million. A $10 million gain from the successful conclusion of a patent infringement lawsuit against a rival provided a huge boost to cash flow.

What management had to say

As CEO James Janik said about the company's results:

Apparently, none of Douglas Dynamic's customers expects that last winter's weak snowfall totals are part of a trend. Instead, customers appear to be preparing for the worst by getting their equipment orders in early, which drove much stronger pre-season sales than anticipated.

Looking forward

Janik also provided his updated outlook on full-year by saying:

Below are the company's updated guidance ranges reflecting both the updated expectations for its legacy business as well as the impact of the recent Dejana acquisition:

* In millions. Data source: Douglas Dynamics.

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Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Douglas Dynamics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.