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Harley-Davidson (HOG) Q3 Earnings Beat Estimates, Up Y/Y

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Harley-Davidson, Inc. (HOG - Free Report) has reported adjusted earnings of 68 cents per share in third-quarter 2018, beating the Zacks Consensus Estimate of 47 cents. In the prior-year quarter, the figure was 40 cents.

Net income augmented to $113.9 million from $68.2 million registered a year ago.

Revenues from the Motorcycle and Related Products segment increased to $1.12 billion in the reported quarter, which was almost in-line with the Zacks Consensus Estimate of $1.1 billion. In the prior-year quarter, the figure was $962 million. The company also reported consolidated revenues of $1.32 billion, marking an increase from the prior year’s figure of $1.15 billion. Harley-Davidson witnessed an improved international retail sales growth.

Harley-Davidson, Inc. Price, Consensus and EPS Surprise


Motorcycles and Related Products

Operating income from the Motorcycles and Related Products segment rose to $65.7 million from $17.4 million recorded a year ago. Further, operating margin was 5.8% compared with 1.8% recorded in the year-ago quarter. This rise was primarily due to higher gross margin and lower SG&A as a percent of revenues compared with the prior-year quarter.

For the quarter ending on Sep 30, the company shipped 48,639 motorcycles compared with 41,662 in third-quarter 2017.

Harley-Davidson’s retail motorcycle sales in the United States declined 13.3% to 36,220 units. International sales gained 2.6% to 23,006 motorcycles from 22,416 in the prior-year quarter. During the reported quarter, sales in Latin America, and the Middle East and Africa (EMEA) region gained 11.8% and 4.6%, respectively. However, sales in the Asia-Pacific and Canada reduced by 0.3% and 4.7%, respectively.

Harley-Davidson’s worldwide retail motorcycle sales fell 7.8% to 59,226 units from 64,209 in the year-ago quarter.

Revenues from the Parts and Accessories segment decreased 7.2% to $212.4 million. Moreover, the metric for General Merchandise — including MotorClothes apparel and accessories — lost 19.8% to $58.3 million.

Harley-Davidson Financial Services

Revenues in Harley-Davidson Financial Services (“HDFS”) were $191.7 million compared with $189.1 million recorded in the prior-year quarter. Operating income gained 8.7% to $83.8 million from $77.1 million in the year-ago quarter.

Financial Position

Harley-Davidson had cash and cash equivalents of $927 million as of Sep 30, 2018, compared with $683.1 million as of Sep 24, 2017. Net long-term debt slumped to $4.2 billion from $4.6 billion as of Sep 24, 2017.

For nine months — ending on Sep 30, 2018 — Harley-Davidson’s operating cash inflow rose to $1.12 billion from $949 million a year ago. Capital expenditure was $119.8 million compared with $114 million in the preceding year period.

Share Repurchase

During third-quarter 2018, the company repurchased 1.9 million common shares for $84.5 million. At the quarter end, 21.3 million shares remained under board-approved share repurchase authorizations.

Looking Forward

For 2018, Harley-Davidson reaffirmed its full-year motorcycle shipments of 231,000-236,000 units. Further, for fourth-quarter 2018, it expects motorcycle shipments to be approximately 45,800-50,800 units.

For 2018, the company reduced its capital expenditure to $230-$250 million from $250-$270 million stated earlier. It includes roughly $50 million to support manufacturing optimization.

Zacks Rank & Key Picks

Harley-Davidson currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Advanced Auto Parts, Inc. (AAP - Free Report) , Horizon Global Corporation (HZN - Free Report) and Allison Transmission Holdings, Inc. (ALSN - Free Report) . Advanced Auto and Horizon Global presently carry a Zacks Rank #2 (Buy) while Allison Transmission sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Auto has an expected long-term growth rate of 12.3%. Over the past three months, shares of the company have gained 17.7%.

Horizon Global has an expected long-term growth rate of 2.7%. Over the past three months, shares of the company have gained 14.1%.

Allison Transmission has an expected long-term growth rate of 10%. Shares of the company have risen 15.3% in the past three months.

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