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Why Is Harley-Davidson (HOG) Down 4.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Harley-Davidson (HOG - Free Report) . Shares have lost about 4.7% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Harley-Davidson due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Harley-Davidson Q1 Earnings Miss Mark

Harley-Davidson reported first-quarter 2022 adjusted earnings of $1.45 per share, missing the Zacks Consensus Estimate of $1.52. Lower-than-anticipated revenues from Motorcycles & Related Products and Financial Services segments resulted in this underperformance. The bottom line also declined 13.7% from $1.68 per share reported in the year-ago quarter.

The motorcycle manufacturer generated consolidated revenues (including motorcycle sales and financial services revenues) of $1,495 million, up 5% from the year-earlier quarter.

Segmental Highlights

Motorcycles and Related Products: Total revenues from the Motorcycle and Related products segment, which constitute the bulk of the firm’s overall revenues, gained 6% on a year-over-year basis to $1,303.1 million. But the top line missed the consensus mark of $1,334 million. The segment’s operating income declined 11% from $228 million to $203 million in the quarter under review. The figure missed the Zacks Consensus Estimate of $241 million.

In the March quarter, revenues from the sale of motorcycles came in at $1,059 million, increasing 4% year over year. The company shipped 54,800 motorcycles worldwide, flat year over year.

During the reported quarter, Harley-Davidson retailed 45,200 motorcycle units globally, up 2% year over year. Its retail motorcycle units sold in North America declined 5% to 31,300. Meanwhile, sales in the EMEA (Europe, Middle East and Africa), Asia Pacific and Latin America increased 28%, 16% and 13%, respectively.

Revenues for Parts & Accessories were up 13% from a year ago to $166 million and topped the consensus mark of $164 million. Revenues from Apparel went up 2% from the prior-year quarter’s figure to $51 million but lagged the consensus mark of $55 million.

Financial Services: Revenues for Harley-Davidson Financial Services totaled $192 million, up 1% year over year but missed the consensus mark of $195 million. Operating income declined 27% to $86 million. The metric, however, topped the consensus mark of $78 million.

Financial Position

In the first quarter of 2022, selling, general and administrative expenses rose 5.5% to $204.8 million from $193.5 million witnessed in the year-ago quarter. The firm generated $139 million of cash from operating activities in the first quarter. The company paid dividends of 15 cents per share in the reported quarter.

Harley-Davidson had cash and cash equivalents of $1,393.7 million as of Mar 31, 2022, significantly down from the $2,320.6 million recorded in the corresponding quarter of 2021. The long-term debt decreased to $4,470.1 million from $5,478.1 million recorded as of Mar 31, 2021.

2022 Guidance

For 2022, the company has restated its previous guidance and projections. Harley-Davidson still expects its operating income for Financial Services to decline 20-25%. Capital expenditure for the full-year remains within $190-$220 million.

The company’s expected revenues from the motorcycles segment continue growing in the band of 5-10% for the current year. Harley-Davidson has also kept the operating income margin expectation for the segment intact at 11-12%.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

The consensus estimate has shifted -9.2% due to these changes.

VGM Scores

At this time, Harley-Davidson has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Harley-Davidson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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