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Harley-Davidson (HOG) Down 7.2% Despite Q2 Earnings Beat

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Harley-Davidson, Inc. (HOG - Free Report) reported second-quarter adjusted earnings of $1.33 per share, surpassing the Zacks Consensus Estimate of $1.15. Higher-than-anticipated operating income from both Motorcycles & Related Products as well as Financial Services segments resulted in this outperformance. The bottom line reflects a turnaround from a loss of 60 cents per share incurred in the year-ago quarter, a period that was severely impacted by pandemic woes.

The iconic motorcycle manufacturer generated consolidated revenues (including motorcycle sales and financial services revenues) of $1,532 million, surging 77% from the year-earlier quarter. However, revenues from the Motorcycle & Related Products unit came in at $1,332 million, missing the consensus mark of $1,365 million.

Shares of the motorcycle giant dipped 7.19% to close the session at $40.65 amid bleak guidance for the back half of 2021. Taking into account the $80-million tariff impact, the firm anticipates operating margin as a percentage of revenues to range from negative to mid-single digit for the latter half of the year. High logistics expenses, soaring raw material costs, shift in product launch timing and incremental EU tariffs will weigh on margins.

HarleyDavidson, Inc. Price, Consensus and EPS Surprise

HarleyDavidson, Inc. Price, Consensus and EPS Surprise

HarleyDavidson, Inc. price-consensus-eps-surprise-chart | HarleyDavidson, Inc. Quote

Segmental Highlights

Motorcycles and Related Products: Total revenues from the Motorcycle and Related products segment, which constitute bulk of the firm’s overall revenues, almost doubled on a year-over-year basis to $1,332 million for the reported quarter. This upside was primarily due to higher wholesale shipments and a favorable product mix. Consequently, the segment posted an operating profit of $186 million against second-quarter 2020 loss of $121 million. The metric also beat the Zacks Consensus Estimate of $177 million.

For the June-end quarter, revenues from the sale of motorcycles came in at $1,030 million, skyrocketing 131% year over year. The company shipped 56,700 motorcycles worldwide, doubling from 28,400 units in second-quarter 2020.

During the quarter under review, Harley-Davidson retailed 65,274 motorcycle units globally, up 24% year over year. Its retail motorcycle units sold in North America grew 43% from the year-ago quarter to 48,185. Meanwhile, sales in the EMEA (Europe, Middle East and Africa), Asia Pacific and Latin America declined 7%, 13% and 31%, respectively, from the year-ago period.

Revenues for Parts & Accessories were up 32% from the prior year to $223 million. Revenues for General Merchandise — including Motor Clothes apparel and accessories — also rose 47% from the prior-year quarter to $56 million.

Financial Services: Revenues for Harley-Davidson Financial Services totaled $201 million, edging up 2% year on year. Operating income jumped to $95 million from $5 million recorded in the year-ago period, thanks to lower provisions for credit losses. The metric also topped the consensus mark of $64 million.

Financial Position

For the June-end quarter, selling, general and administrative expenses increased to $220.4 million from $187.6 million witnessed in second-quarter 2020. The firm generated $482.3 million of cash from operating activities during second-quarter 2021. Capital expenditure totaled $18.8 million. The company paid dividends of 15 cents per share in second-quarter 2021.

Harley-Davidson — which shares space with U.S. auto biggies like Tesla (TSLA - Free Report) , General Motors (GM - Free Report) and Ford (F - Free Report) in the same industry — had cash and cash equivalents of $1,741.9 million as of Jun 27, 2021 compared with $3,257.2 million recorded at 2020-end. Long-term debt decreased to $4,745 million from $5,932.9 million recorded as of Dec 31, 2020.

2021 Guidance

The Zacks Rank #2 (Buy) company reaffirmed its forecast for the motorcycles segment’s revenues, which are expected to grow in the band of 30-35% in 2021. However, Harley-Davidson lowered the operating income margin expectation for the segment from 7-9% to 6-8%. In consideration of its ability to mitigate additional EU tariffs, operating income margin is expected at 7-9%. Operating income growth for Financial Services is now forecast within 75-85%, up from the prior view of 50-60%. Capital expenditure for the full year is projected within $190-$225 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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