NEW YORK ( TheStreet) -- Recreational vehicle company Polaris Industries ( PII) will need to execute on expectations for a modest sales recovery in 2010 in order to support Wall Street's view of where its stock is headed.

Polaris Going Commando

While most of the analysts covering the company have a hold rating on the stock (6 out of 10), their current median 12-month price target on the shares is $53.50, according to Thomson Reuters, a level that represents potential appreciation of roughly12% from where the stock is currently trading. Wall Street's consensus estimate is for a profit of $3.28 a share from Polaris in 2010 with sales projected to grow to $1.61 billion for the year, a slight rise from its 2009 total of $1.57 billion.

The company, which is well known for its all-terrain vehicles (ATV's), snowmobiles and motorcycles, weathered the recession by reducing inventories and keeping a close eye on costs. Unfortunately, its products are often seen as discretionary purchases, making sales particularly susceptible to weak economic conditions. The Victory brand motorcycle line, which was started in 1998, was targeted for the boomer market in an attempt to take market share from Harley Davidson ( HOG) but the product line only accounts for roughly 3% of annual sales. Snowmobiles make up 11% of sales, leaving the rest of the business to off-road vehicles.

What the company has done to differentiate itself from the competition is place a focus on building up sales to the military. CEO Scott Wine was named CEO of the company in August 2008 and as a former navy officer, he brings a military background to the C-suite. Wine believes the company's ATV products easily lend themselves to the military applications and have the potential to create a more steady flow of business for the company. I was able to ask Wine about this focus on the military, which isn't broken out into detail in sales reports.

TheStreet: You're in ATVs, you're in motorcycles, and you're also in the military market. Which out of these three are you most focused on for your growth?

Wine: Our growth is coming across the portfolio. Right now, our off-road vehicles, which is also our side-by-side as well as ATVs, is driving our growth both in the United States and Europe as well. But we see great opportunities in our motorcycle business, even our snowmobile business is poised to have a great year. We'll introduce a lot of new products at the upcoming show.

TheStreet: You're talking about growth but we know that last year sales were down in a lot of these categories and we also know the consumer is going to have a rough year -- I think you guys had even said that -- so I'm not sure where the growth is going to come from.

Wine: Sales were down 20% for Polaris last year and the fact is we had to manage through a difficult environment. Fortunately our team and our business model was positioned to do that quite well. What we're happy about right now is that we finished the year with momentum. We had record earnings per share in the fourth quarter, even though sales were down 10%.

But the retail environment, the sales to our dealer network, I mean to our customers throughout our dealer network were down only 4% in the fourth quarter and that will turn positive in the first quarter. We've issued guidance, we'll be up 1-3% in growth in 2010, and we feel confident we'll get there. A lot of adjacency work is paying off, our core markets are down, the industries are tough, the economies are weak. But we do see opportunities, our relationship with Bobcat, our neighborhood electric vehicle, these are offering new opportunities for growth in the company.

TheStreet: You mentioned the electric vehicle -- you recently won a contract on that. Do you see a lot of future in electric vehicles at your company?

Wine: I think it's going to be an important part of the portfolio. I don't think it'll ever be a dominant part. The power sports enthusiasts really like the extra power and performance you get from our gas-powered and ultimately diesel-powered products as well. But we think the electric vehicle market is a space that we need to be in and we believe that we can provide innovation in that market that gives us a competitive advantage for growth.

TheStreet: You have a good military background, a strong one. Your company has been issuing some military-type vehicles. Do you see that as an area where you can compete against the normal defense contractors?

Wine: I think we have a distinct advantage against the normal defense contractors in that our business model is set up for speed and innovation. And what we're providing to the war fighter today is products that they can use and innovative manners.

One story I like to tell is about an e-mail we received from a weapons sergeant in Afghanistan talking about how he's using our MV 700 an ATV model to transport soldiers off the road, away from where the IEDs Improvised Explosive Devices are. They soldiers take out ATVs and they never go on the road. The military continues to find ways to use our products both on and off base. And we're continuing to innovate. There will be tremendous growth ahead for us. We grew 51% last year in our military business and we expect to continue to invest and grow well into the future in that product line.

TheStreet: Of those three businesses, ATVs, Military and Motorcycles, which is the one you are investing the most in?

Wine: I think our investment is probably about even. ATV is the largest of those businesses so we're probably putting more dollars into the ATV category. But on a percentage basis, related to the size of the businesses, I think the military is probably getting the most investment.

Edited for length and clarity.

-- Written by Debra Borchardt.

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