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Harley-Davidson (HOG) Q3 Earnings: Stock to Disappoint?

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Harley-Davidson, Inc. (HOG - Free Report) is set to report third-quarter 2016 results on Oct 18. In the last quarter, it delivered a positive earnings surprise of 1.31%. Further, the company managed to beat earnings in three of the last four quarters with a positive average surprise of 2.95%. Let us see how things are shaping up for this announcement.

Factors Influencing this Quarter

Harley-Davidson commands a large market share that provides scale advantages over most competitors. The company is expanding its product portfolio to increase its customer base. Its large share in the U.S. motorcycle market, consistent capital deployment and favorable shipment guidance are positives. However, Harley-Davidson expects stiff competition to hurt retail sales this year as competitors rely on discounting and product introduction to boost sales. Further, the company anticipates headwinds due to macroeconomic challenges in some regions.

In the third quarter of 2016, Harley-Davidson expects to ship 48,500−53,500 motorcycles, compared with 53,472 motorcycles shipped in the year-ago period. The company also reduced its guidance for motorcycle shipments in 2016 to 264,000–269,000 units from the prior range of 269,000–274,000 units. This implies that the year-over-year change in shipments will vary between a decline of 1% and a rise of 1%. The lower guidance is due to softness in the U.S. market, high competition and global economic uncertainty. Harley-Davidson also expects a small decline in operating income for the Financial Services segment this year due to increased borrowing costs and unfavorable provision for credit losses, partially offset by higher revenues.

Earnings Whispers

Our proven model does not conclusively show that Harley-Davidson is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP for Harley-Davidson is currently pegged at -1.59%. This is because the Most Accurate estimate of 62 cents stands below the Zacks Consensus Estimate of 63 cents.

Zacks Rank: Harley-Davidson currently has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

HARLEY-DAVIDSON Price and EPS Surprise

 

HARLEY-DAVIDSON Price and EPS Surprise | HARLEY-DAVIDSON Quote

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

The Goodyear Tire & Rubber Company (GT - Free Report) , which is expected to report third-quarter 2016 results on Nov 3, has an Earnings ESP of +1.75% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fox Factory Holding Corp (FOXF - Free Report) has an Earnings ESP of +2.56% and a Zacks Rank #2 (Buy). The company will report third-quarter 2016 financial numbers on Nov 2.

Magna International Inc. (MGA - Free Report) has an Earnings ESP of +2.5% and a Zacks Rank #2. The company is expected to release third-quarter 2016 results on Nov 3.

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