Harley-Davidson (HOG) Q1 Earnings Beat Estimates, Fall Y/Y

Harley-Davidson, Inc. HOG reported earnings of $ 1.05 per share in the first quarter of 2017, beating the Zacks Consensus Estimate of 99 cents. However, earnings were lower than $ 1.36 recorded in the year-ago quarter.

Net income decreased to $ 186.4 million from $ 250.5 million recorded a year ago.

Operating revenues (excluding financial services) declined to $ 1.33 billion in the first quarter of 2017 from $ 1.58 billion recorded in the year-ago quarter. The figure missed the Zacks Consensus Estimate of $ 1.35 billion. Harley-Davidson logged consolidated revenues of $ 1.5 billion, which deteriorated from $ 1.75 billion posted a year ago.

Operating income decreased to $ 291.5 million from $ 388.8 million in the year-ago period.

Harley-Davidson, Inc. Price, Consensus and EPS Surprise

 

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Harley-Davidson, Inc. Price, Consensus and EPS Surprise | Harley-Davidson, Inc. Quote

Motorcycles and Related Products

Revenues from Motorcycles and Related Products dropped to $ 1.33 billion in the first quarter of 2017 from $ 1.58 billion recorded in the year-ago quarter. The decline was due to lower retail sales. On the other hand, operating income declined to $ 238.8 million from $ 332.5 million a year ago.

Revenues from Harley-Davidson motorcycles fell 16.7% to $ 1.1 billion. The company shipped 70,831 motorcycles to dealers and distributors worldwide during the first quarter of 2017, compared with 83,036 shipments in the first quarter of 2016.

Harley-Davidson’s worldwide dealer retail sales of new motorcycles declined 4.2% to 55,049 units from 57,458 motorcycles in the year-ago quarter. This was due to weakness in the U.S. as well as some international markets. Harley-Davidson’s sales in the U.S. declined 5.7% to 33,316 motorcycles. International sales went down 1.8% to 21,733 motorcycles from 22,132 motorcycles in the prior-year quarter. An improvement of 24.2% in sales in the Latin America region was offset by a 4.4% decline in Canada, 0.4% decline in the Europe, Middle East, and Africa (EMEA) region and 9.3% decline in the Asia-Pacific region.

Revenues from Parts and Accessories dropped 8% to $ 169 million, while revenues from General Merchandise— including MotorClothes apparel and accessories—fell 20.9% to $ 55.8 million.

Harley-Davidson Financial Services (HDFS)

Revenues in the Financial Services segment dipped 0.1% to $ 173.2 million in the first quarter of 2017. Operating income declined 6.6% to $ 52.6 million from the year-ago figure of $ 56.4 million.

Financial Position

Harley-Davidson had cash and cash equivalents of $ 839.7 million as of Mar 26, 2017, compared with $ 694 billion as of Mar 27, 2016. Long-term debt fell to $ 5.32 billion from $ 5.46 billion as of Mar 27, 2017.

In first-quarter 2017, Harley-Davidson’s operating cash flow improved to $ 159.9 million from $ 41.1 million in first-quarter 2016. Capital expenditures decreased to $ 24 million from $ 39 million in the year-ago period.

Share Repurchases

Harley-Davidson spent $ 70.9 million to repurchase 1.2 million shares in first-quarter 2017. As of first-quarter end, it had authorization to buy back another 18 million shares.

Looking Forward

Harley-Davidson reiterated its expectation of motorcycle shipments in 2017 to be either the same or slightly lower than 2016.

In the second quarter of 2017, Harley-Davidson expects to ship 80,000 to 85,000 motorcycles, compared with 88,160 motorcycles shipped in the year-ago period.

The company continues to project operating margin and gross margin to be similar to the 2016 levels. It expects capital expenditures of $ 200–$ 220 million this year.

Price Performance

Harley-Davidson outperformed the Zacks categorized Automotive-Domestic industry over the last three months owing to its improving financial position as well as  geographic and product expansion. The company’s shares gained 1.5% over the last three months, compared with the industry’s 0.3% decline.

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Zacks Rank & Key Picks

Currently, Harley-Davidson carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the auto space include BorgWarner Inc. BWA, American Axle & Manufacturing Holdings, Inc. AXL and GKN plc GKNLY. All stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BorgWarner has an expected long-term growth rate of 8.6%.

American Axle has an expected growth rate of around 8.1% over the long term.

GKN has an expected long-term growth rate of 6.6%.

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Craig Ballantyne

I love anything to do with Harley Davidson and have two beautiful children and a beautiful partner. In my spare time i like building websites and love anything to do with the internet.

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