Harley-Davidson, Inc. (HOG - Free Report) 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.
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.
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.
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.
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.
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.
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 - Free Report) , American Axle & Manufacturing Holdings, Inc. (AXL - Free Report) and GKN plc (GKNLY - Free Report) . 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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