It has been about a month since the last earnings report for Harley-Davidson, Inc. HOG. Shares have lost about 6.1% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Harley-Davidson Q1 Earnings Beat Estimates, Fall Y/Y
Harley-Davidson reported earnings of $1.05 per share in the first quarter of 2017, beating the Zacks Consensus Estimate of $0.99. However, earnings were lower than $1.36 recorded in the year-ago quarter.
Net income decreased to $186.4 million from $250.5 million recorded a year ago.
Operating revenues (excluding financial services) declined to $1.33 billion in the first quarter of 2017 from $1.58 billion recorded in the year-ago quarter. The figure missed the Zacks Consensus Estimate of $1.35 billion. Harley-Davidson logged consolidated revenues of $1.5 billion, which deteriorated from $1.75 billion posted a year ago.
Operating income decreased to $291.5 million from $388.8 million in the year-ago period.
Motorcycles and Related Products
Revenues from Motorcycles and Related Products dropped to $1.33 billion in the first quarter of 2017 from $1.58 billion recorded in the year-ago quarter. The decline was due to lower retail sales. Moreover, operating income declined to $238.8 million from $332.5 million a year ago.
Revenues from Harley-Davidson motorcycles fell 16.7% to $1.1 billion. The company shipped 70,831 motorcycles to dealers and distributors worldwide during the first quarter of 2017, compared with 83,036 shipments in the first quarter of 2016.
Harley-Davidson’s worldwide dealer retail sales of new motorcycles declined 4.2% to 55,049 units from 57,458 motorcycles in the year-ago quarter. This was due to weakness in the U.S. as well as some international markets. Harley-Davidson’s sales in the U.S. declined 5.7% to 33,316 motorcycles. International sales went down 1.8% to 21,733 motorcycles from 22,132 motorcycles in the prior-year quarter. An improvement of 24.2% in sales in the Latin American region was offset by a 4.4% decline in Canada, 0.4% decline in the Europe, Middle East, and Africa (EMEA) region and 9.3% decline in the Asia-Pacific region.
Revenues from Parts and Accessories dropped 8% to $169 million, while revenues from General Merchandise—including MotorClothes apparel and accessories—fell 20.9% to $55.8 million.
Harley-Davidson Financial Services (HDFS)
Revenues in the Financial Services segment dipped 0.1% to $173.2 million in the first quarter of 2017. Operating income declined 6.6% to $52.6 million from the year-ago figure of $56.4 million.
Harley-Davidson had cash and cash equivalents of $839.7 million as of Mar 26, 2017, compared with $694 billion as of Mar 27, 2016. Long-term debt fell to $5.32 billion from $5.46 billion as of Mar 27, 2016.
In first-quarter 2017, Harley-Davidson’s operating cash flow improved to $159.9 million from $41.1 million in first-quarter 2016. Capital expenditures decreased to $24 million from $39 million in the year-ago period.
Harley-Davidson spent $70.9 million to repurchase 1.2 million shares in first-quarter 2017. As of first-quarter end, it had authorization to buy back another 18 million shares.
Harley-Davidson reiterated its expectation of motorcycle shipments in 2017 to be either the same or slightly lower than 2016.
In the second quarter of 2017, Harley-Davidson expects to ship 80,000 to 85,000 motorcycles, compared with 88,160 motorcycles shipped in the year-ago period.
The company continues to project operating margin and gross margin to be similar to the 2016 levels. It expects capital expenditures of $200–$220 million this year.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been 11 revisions lower over the last 60 days. In the past two months, the consensus estimate has shifted downward by 13.2% due to these changes.
Harley-Davidson, Inc. Price and Consensus
Harley-Davidson, Inc. Price and Consensus | Harley-Davidson, Inc. Quote
At this time, the stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with a 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. 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.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Click for Free Harley-Davidson, Inc. (HOG) Stock Analysis Report >>
To read this article on Zacks.com click here.
Zacks Investment Research