Harley-Davidson's (HOG) Q3 Earnings Beat Estimates, Down Y/Y

Harley-Davidson, Inc. (NYSE:HOG) delivered diluted earnings per share of $70 cents in third-quarter 2019, which surpassed the Zacks Consensus Estimate of 67 cents. In the prior-year quarter, the figure had amounted to 78 cents per share. This outperformance resulted from the higher-than-expected sales in the firm’s motorcycle and related products segment.

The company’s net income amounted to $86.6 million compared with the year-ago quarter’s $113.9 million.

Total revenues declined 4.9% year over year to $1,069 million in the reported quarter. However, the revenue figure beat the Zacks Consensus Estimate of $1037 million. The company reported consolidated revenues (including motorcycle sales and financial services revenues) of $1.27 billion, which declined from the prior-year quarter’s $1.32 billion.

Motorcycles and Related Products

In the third quarter, operating income from the Motorcycles and Related Products segment amounted to $46.97 million compared with the $65.66 million reported in the year-ago quarter. This downside primarily resulted from lower revenues and higher tariff costs, partially offset by savings realized from the company's manufacturing-optimization initiative.

In the quarter ending Sep 30, 2019, the company shipped 45,837 motorcycles compared with 48,639 in third-quarter 2018.

Harley-Davidson’s retail motorcycle units sold in the United States declined 3.6% to 34,903. International units sold increased 2.7% to 23,619 motorcycles from 23,006 in the prior-year quarter. Sales in the Middle East and Africa (EMEA) and Latin America declined 0.6% and 3.1%, respectively. In Asia Pacific and Canada, sales increased 8.7% and 4.4%, respectively.

Harley-Davidson’s worldwide retail motorcycle units sold edged down 1.2% to 58,522 from 59,226 in the year-ago quarter.
Revenues in the Parts & Accessories segment fell 4.3% to $203 million. Moreover, the metric for General Merchandise — including Motor Clothes apparel and accessories — increased 3.4% to $60 million.

Harley-Davidson Financial Services

Revenues for Harley-Davidson Financial Services (“HDFS”) amounted to $204 million compared with the prior-year quarter’s $192 million. Operating income declined 13% to $72.9 million from $83.8 million in the year-ago quarter. The debt-to capital ratio stands at 71.5% at the end of the quarter.

Financial Position

Harley-Davidson had cash and cash equivalents of 862 million as of Sep 29, 2019, compared with $927 million as of Sep 30, 2018. Net long-term debt increased to $4,607 million from $4197 million as of Sep 30, 2018.
As of Sep 29, 2019 the company’s net operating cash inflow was $848 million compared with $1122 million as of Sep 30, 2018. Capital expenditure was $121 million compared with $119 million recorded in the prior-year period.

Looking Forward

For 2019, Harley-Davidson has reiterated its full-year motorcycle shipment projection in the range of 212,000-217,000 motorcycles. For fourth-quarter 2019, it expects motorcycle shipments to be approximately 38,500 to 43,500.

The motorcycles segment operating margin, as a percentage of revenues, is expected in the band of 6-7% for the full year.

Zacks Rank & Stocks to Consider

Harley currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the Auto-Tires-Trucks sector are PACCAR Inc. (NASDAQ:PCAR) , Bridgestone Corp. (OTC:BRDCY) and Cummins Inc. (NYSE:CMI) , all carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PACCAR has an expected earnings growth rate of 7.69% for 2019. The company’s shares have rallied 27.2% in the past year.

Bridgestone has a projected earnings growth rate of 14.19% for the current year. Its shares have gained around 8.6% in the past year.

Cummins has an estimated earnings growth rate of 19.50% for the current year. The company’s shares have rallied roughly 27.2% in a year’s time.

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