Harley-Davison (HOG) Q1 Earnings Beat Estimates, Down Y/Y

Harley-Davidson, Inc.’s (NYSE:HOG) adjusted earnings per share were 98 cents in first-quarter 2019, which surpassed the Zacks Consensus Estimate of 67 cents. In the prior-year quarter, the figure was $1.24 per share.

The company’s net income was $127.9 million compared with $174.8 million registered a year ago.

Revenues from the Motorcycle and Related Products segment declined 12.3% year over year to $1.2 billion in the reported quarter, which missed the Zacks Consensus Estimate of $1.22 billion. The company reported consolidated revenues of $1.38 billion, marking a decline from the prior-year quarter’s $1.54 billion. This fall was majorly due to declining worldwide retail unit sale.

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

Motorcycles and Related Products

In first-quarter 2019, operating income from the Motorcycles and Related Products segment was $108.4 million compared with operating income of $172.8 million in the year-ago quarter. This fall in income was due to lower revenues, unfavorable product mix and increased tariffs.

In the quarter ending on Mar 31, the company shipped 58,891 motorcycles compared with 63,944 in first-quarter 2018.

Harley-Davidson’s retail motorcycle units sold in the United States declined 4.2% to 28,091. International units sold declined 3.3% to 21,060 motorcycles from 21,777 in the prior-year quarter. During the reported quarter, sales across all the markets experienced declines. Sales in the Middle East and Africa (EMEA), the Asia Pacific, Latin America, and Canada declined 0.6%, 4%, 10.6% and 6.3%, respectively.

Harley-Davidson’s worldwide retail motorcycle units sold declined 3.8% to 49,151 from 51,086 in the year-ago quarter.

Revenues from the Parts & Accessories segment decreased 5.5% to $159.7 million. Moreover, the metric for General Merchandise — including MotorClothes apparel and accessories — lost 2.1% to $55.4 million.

Harley-Davidson Financial Services

Revenues for Harley-Davidson Financial Services (“HDFS”) were $188.7 million compared with $178.2 million recorded in the prior-year quarter. Operating income declined 7.6% to $58.7 million from $63.6 million in the year-ago quarter.

Financial Position

Harley-Davidson had cash and cash equivalents of $749 million as of Mar 31, 2019, compared with $753.5 million as of Apr 1, 2018. Net long-term debt rose to $4.74 billion from $4.12 billion as of Apr 1, 2018.

At the end of the first quarter, the company’s net operating cash inflow was $32.7 million from $191.6 million a year ago. Capital expenditure was $32.6 million compared with $28.4 million in the preceding year period.

Looking Forward

For 2019, Harley-Davidson reiterated the full-year motorcycle shipments projection of 217,000-222,000 motorcycles. Further, for second-quarter 2019, it expects motorcycle shipments to be approximately 65,500-70,500.

Zacks Rank & Stocks to Consider

Harley-Davidson currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader auto sector are AB Volvo (OTC:VLVLY) , PACCAR Inc. (NASDAQ:PCAR) and Fox Factory Holding Corporation (NASDAQ:FOXF) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Volvo has an expected long-term growth rate of 5%. The stock has gained 21.6% in the past three months.

PACCAR has an expected long-term growth rate of 8.4%. The stock has gained 15.1% in the past three months.

Fox Factory has an expected long-term growth rate of 15.1%. Over the past three months, shares of the company have gained 27%.

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