Harley-Davidson (HOG): Will Its Earnings Disappoint In Q2?

Harley-Davidson, Inc. (NYSE:HOG) is set to report second-quarter 2016 results on Jul 28. In the last quarter, it delivered a positive earnings surprise of 6.25%. Further, the company managed to beat earnings in three of the last four quarters with a positive average surprise of 3.53%. Let us see how things are shaping up for this announcement.

Factors Influencing this Quarter

Harley-Davidson is expanding its product portfolio to increase its customer base. The company’s large share in the U.S. motorcycle market, consistent capital deployment and favorable shipment guidance are positives. Harley-Davidson expects shipments in 2016 to be around 269,000–274,000 units, up 1%–3% year over year. International sales are anticipated to grow faster than U.S. sales this year.

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. Harley-Davidson also expects a small decline in operating income for the Financial Services segment this year due to increased borrowing costs and unfavorable 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 -0.65%. This is because the Most Accurate estimate of $1.52 stands below the Zacks Consensus Estimate of $1.53.

Zacks Rank: Harley-Davidson currently has a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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:

Westport Fuel Systems Inc. (NASDAQ:WPRT) has an Earnings ESP of +9.09% and a Zacks Rank #3. The company’s second-quarter 2016 financial results are expected to release on Aug 3.

Allison Transmission Holdings, Inc. (NYSE:ALSN) has an Earnings ESP of +6.35% and a Zacks Rank #3. The company’s second-quarter 2016 financial results are expected to release on Jul 27.

Tower International, Inc. (NYSE:TOWR) has an Earnings ESP of +2.82% and a Zacks Rank #3. The company’s second-quarter 2016 financial results are expected to release on Jul 26.