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Why is Harley-Davidson (HOG) Up 1.5% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for Harley-Davidson, Inc. (HOG - Free Report) . Shares have added about 1.5% in that time frame.

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

Harley-Davidson Q1 Earnings Beat Estimates, Fall Y/Y

Harley-Davidson reported adjusted earnings of $1.03 per share in first-quarter 2018, beating the Zacks Consensus Estimate of 89 cents. Adjusted earnings in the year-ago quarter were $1.05.

Net income decreased to $174.8 million from $186.4 million registered a year ago.

Motorcycle and related products revenues rose to $1.36 billion in the reported quarter compared with $1.33 billion in the prior-year quarter. The figure surpassed the Zacks Consensus Estimate of $1.26 billion. The company also logged consolidated revenues of $1.54 billion, improving from the prior-year figure of $1.5 billion.

Operating income declined to $236 million from $289 million in the year-ago period.

Motorcycles and Related Products

Operating income from Motorcycles and Related Products declined to $172.8 million from $236.5 million recorded a year ago.

The company shipped 63,944 motorcycles during the quarter under review compared with 70,831 shipments in first-quarter 2017.

Harley-Davidson’s retail motorcycle sales in the United States declined 12% to 29,309 units. International sales gained 0.2% to 21,777 motorcycles from 21,733 in the prior-year quarter. During the reported quarter, Latin America, and the Middle East and Africa (EMEA) regions’ sales gained 7% and 6.8%, respectively, while Canada and Asia-Pacific regions’ sales reduced 11.9% and 7.8%, respectively.

Harley-Davidson’s worldwide retail motorcycle sales fell 7.2% to 51,086 units from 55,049 motorcycles in the year-ago quarter.

Revenues from Parts and Accessories gained 0.6% to $169 million. Similarly, the metric for General Merchandise — including MotorClothes apparel and accessories — rose 1.4% to $56.6 million.

Harley-Davidson Financial Services (HDFS)

Revenues in the Financial Services segment rose 2.9% to $178 million in first-quarter 2018. Operating income improved 20.8% to $63.6 million from the year-ago figure of $52.6 million.

Financial Position

Harley-Davidson had cash and cash equivalents of $753.5 million as of Apr 1, 2018, compared with $839.7 million as of Mar 26, 2017. Long-term debt lowered to $4.1 billion from $5.3 billion as of Mar 26, 2017.

For the fiscal year, ending Dec 31, 2017, Harley-Davidson’s operating cash inflow rose to $192 million from $160 million a year-ago. Capital expenditures increased to $28.4 million from $24 million in the preceding year period.

Share Repurchase

During first-quarter 2018, the company repurchased 1.4 million of common shares for $65.1 million. At the quarter-end, 24.2 million shares remained under board-approved share repurchase authorizations.

2018 Outlook

For 2018, Harley-Davidson reaffirmed its full-year motorcycle shipments to be 231,000-236,000 units. Also, for second-quarter 2018, it expects motorcycle shipments to be approximately 67,500-72,500 units.

Moreover, for 2018, the company anticipates capital expenditures of $250-$270 million. Further, the operating margin is estimated at nearly 9.5-10.5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been nine revisions lower for the current quarter.

Harley-Davidson, Inc. Price and Consensus

 

Harley-Davidson, Inc. Price and Consensus | Harley-Davidson, Inc. Quote

VGM Scores

At this time, HOG has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, HOG has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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