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Harley-Davidson (HOG) Q2 Earnings Top Estimates, Fall Y/Y

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Harley-Davidson, Inc. (HOG - Free Report) reported adjusted earnings of $1.45 per share in second-quarter 2018, beating the Zacks Consensus Estimate of $1.35. In the prior-year quarter, the figure was $1.48.

Net income decreased to $242.3 million from $258.9 million registered a year ago.

Revenues from Motorcycle and Related Products declined to $1.53 billion in the reported quarter compared with $1.58 billion in the prior-year quarter. However, the figure surpassed the Zacks Consensus Estimate of $1.42 billion. The company also received consolidated revenues of $1.71 billion, declining from the prior-year figure of $1.77 billion.

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

 

Motorcycles and Related Products

Operating income from Motorcycles and Related Products declined to $243 million from $317 million recorded a year ago. This was primarily due to lower shipments, higher operating expenses and costs associated with the manufacturing optimization initiative.

For the quarter ending on Jul 1, the company shipped 72,593 motorcycles compared with 81,807 shipments in second-quarter 2017.

Harley-Davidson’s retail motorcycle sales in the United States declined 6.4% to 46,490 units. International sales gained 0.7% to 31,938 motorcycles, from 31,720 in the prior-year quarter. During the reported quarter, Latin America, and the Middle East and Africa (EMEA) region sales gained 9.1% and 3.6%, respectively. However, Asia-Pacific and Canada regional sales reduced by 7.1% and 0.5%, respectively.

Harley-Davidson’s worldwide retail motorcycle sales fell 3.6% to 78,428 units from 81,388 motorcycles in the year-ago quarter.

Revenues from Parts and Accessories decreased 2.3% to $231 million. However, the metric for General Merchandise — including MotorClothes apparel and accessories — rose 8.9% to $68.7 million.

Harley-Davidson Financial Services

Revenues in Harley-Davidson Financial Services (“HDFS”) were $188.1 million, almost in line with the prior-year quarter. Operating income fell 1.7% to $80.5 million from the year-ago figure of $81.9 million.

Financial Position

Harley-Davidson had cash and cash equivalents of $978.7 million as of Jul 1, 2018, compared with $988.5 million as of Jun 25, 2017. Long-term debt rose to $4.87 billion from $4.68 billion as of Jun 25, 2017.

For the half-year — ending on Jul 1, 2018 — Harley-Davidson’s operating cash inflow rose to $735.9 million from $627.1 million a year ago. Capital expenditure was $69.3 million compared with $69.8 million in the preceding year period.

Share Repurchase

During second-quarter 2018, the company repurchased 900,000 common shares for $38.2 million. At the quarter end, 23.2 million shares remained on board-approved share repurchase authorizations.

Looking Forward

For 2018, Harley-Davidson reaffirmed its full-year motorcycle shipments to be 231,000-236,000 units. Also, for third-quarter 2018, it expects motorcycle shipments to be approximately 45,500-50,500 units.

Moreover, for 2018, the company reaffirmed its capital expenditure to be $250-$270 million, which includes roughly $50 million to support manufacturing optimization.

Zacks Rank & Key Picks

Harley-Davidson currently carries a Zacks Rank #4 (Sell). A few better-ranked stocks in the auto space are LKQ Corporation (LKQ - Free Report) , General Motors Company (GM - Free Report) and Fox Factory Holding Corporation (FOXF - Free Report) . LKQ sports a Zacks Rank #1 (Strong Buy) while General Motors and Fox Factory carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

LKQ has an expected long-term growth rate of 15%. Over a year, shares of the company have gained 4%.

General Motors has an expected long-term growth rate of 8.8%. Over a year, shares of the company have gained 10.4%.

Fox Factory has an expected long-term growth rate of 15.8%. Shares of the company have risen 35.4% in the past year.

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