Harley-Davidson Inc. ( HOG ) posted a 29.2%
rise in earnings per share to 31 cents in the fourth quarter of
2012 from 24 cents in the same quarter of 2011. EPS was in line
with the Zacks Consensus Estimate. Net income grew 29.3% to $70.6
million from $54.6 million in the fourth quarter of 2011.
However, consolidated revenues in the quarter slid 0.8% to $1.17
billion in the quarter due to announced plans for lower shipments
related to the implementation of seasonal surge production at its
York facility in the first half of 2013. Nevertheless, it was
higher than the Zacks Consensus Estimate of $982 million. Operating
income improved 25.7% to $116.1 million, mainly driven by
significantly lower restructuring expenses.
For the full year 2012, Harley's EPS increased 16.7% to $2.72 from
$2.33 a year ago. However, the EPS was lower than the Zacks
Consensus Estimate of $2.74. Net income gained 13.8% to $623.9
Meanwhile, consolidated revenues grew 5.1% to $5.58 billion,
exceeding the Zacks Consensus Estimate of $4.91 billion. The
improvement in revenues and profits was attributable to the
company's strong product portfolio and positive impact from its
Motorcycles and Related Products
Revenues from Motorcycles and Related Products edged down 1.5% to
$1.01 billion in the quarter. Revenues from motorcycle sales shrank
2.6% to $771.1 million due to a 7.2% fall in shipments to 47,067
motorcycles in the quarter. However, operating income surged 49.4%
to $53.1 million driven by lower restructuring costs and higher
For the full year, revenues from Motorcycles and Related Products
rose 6.0% to $4.94 billion. Revenues from motorcycles sales went up
5.9% to $3.76 billion on a 6.2% rise in shipments to 247,625
Revenues from Motorcycle Parts and Accessories (P&A) rose 0.2%
to $161.6 million for the quarter and 5.3% to $859.9 million for
the year. Meanwhile, revenues from General Merchandise, (including
MotorClothes Apparel and Accessories) scaled up 6.8% to $74.0
million for the quarter and 9.2% to $299.4 million for the
Gross margin was 31.8% in the quarter compared with 31.2% in the
same quarter of 2011. Operating margin was 5.3% compared with 3.5%
in the fourth quarter of 2011. For the full year, gross margin was
34.8% and operating margin was 14.5%, compared with 33.4% and
12.0%, respectively in 2011.
Harley-Davidson Financial Services
Operating income in the Financial Services segment increased 10.9%
increase to $63.0 million in the quarter under study and rose 5.9%
to $284.7 million in the year. The increase in income was
attributable to continued improvement in credit loss performance
and lower interest expense.
Harley realized savings of $280.0 million in 2012 from
restructuring activities initiated in early 2009. The company
incurred restructuring charges of $1.6 million in the quarter and
$28.5 million in the year.
Upon completion of restructuring activities in this year, Harley
expects restructuring actions to result in one-time overall costs
of $495.0 million, including $13.0 million in 2013. The company
expects savings of $305.0 million in the year from restructuring
activities, leading to annual ongoing savings of $320.0 million
beginning in 2014.
Harley's cash and cash equivalents totaled $1.07 billion as of
December 31, 2012 compared with $1.53 billion as of December 31,
2011. Total debt reduced to $5.10 billion as of December 31, 2012
from $5.72 billion as of December 31, 2011 (all including debt held
by variable interest entities). Consequently, long-term debt to
capitalization ratio improved to 66.6% as of December 31, 2012 from
70.3% as of December 31, 2011.
In 2012, Harley had an operating cash flow of $793.1 million, a
decrease from $885.3 million in the prior year. Meanwhile, capital
expenditures remained flat at $189.0 million compared with the
Harley repurchased 1.2 million shares of its common stock during
the quarter for $53.4 million. In full year 2012, the company has
repurchased 6.5 million shares of its stock for $299.6
At the end of 2012, there were approximately 226 million shares
outstanding and 14.5 million shares remaining under board-approved
share repurchase authorizations.
In 2013, Harley expects to ship 259,000 to 264,000 motorcycles to
dealers and distributors worldwide, reflecting roughly 4.5%-6.5%
increase from 2012. In the first quarter of 2013, the company
expects to ship 71,000 to 76,000 motorcycles, an increase of
10%-18% from the year-ago quarter.
The company's shipment plan in the quarter reflects the
implementation of surge production at York. It believes that the
surge production will provide the flexibility to produce more
motorcycles in order to meet customer demand during the prime
selling season.COMML VEHICLE (CVGI): Free Stock Analysis
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Harley also expects gross margin between 35.25% and 36.25 % for
the full year. It expects capital expenditures between $200 million
and $220 million for the year.
Harley-Davidson commands roughly 50% of the U.S. market, providing
scale advantages over most competitors. Furthermore, the company
maintains an extremely strong franchise. The company retains a
Zacks Rank #3 on its stock, which translates to a Hold rating for
the short term (1 to 3 months).
Few stocks that are performing well in the industry where the
company operates include Oshkosh Corporation ( OSK ) and
Commercial Vehicle Group Inc. ( CVGI ), both with
Zacks Rank #1 (Strong Buy), and Tesla Motors ( TSLA ) with a Zacks
Rank #2 (Buy).