Harley-Davidson Beats Q3 Earnings - Analyst Blog


Harley-Davidson Inc. ( HOG ) posted a 23.7% year-over-year rise in earnings to 73 cents per share in the third quarter of 2013 from 59 cents in the year-ago quarter. Earnings topped the Zacks Consensus Estimate by a cent.

Net income increased 21.4% to $162.7 million from $134 million a year ago. Consolidated revenues improved 7.2% to $1.34 billion, exceeding the Zacks Consensus Estimate of $1.16 billion.

The increase in sales and earnings during the quarter was attributable to increase in motorcycle shipments and continued improvement in operating efficiencies of plants. Operating income rose 15.9% to $251.5 million from $217.1 million in the third quarter of 2012.

Motorcycles and Related Products

Revenues from Motorcycles and Related Products improved 8.4% to $1.18 billion in third-quarter 2013, driven by healthy improvement in motorcycle shipments. Revenues from Harley-Davidson motorcycles increased 10.7% to $857 million.

Operating income from Motorcycles and Related Products rose 21.2% to $175.5 million from $144.8 million year ago. The year-over-year improvement was driven by increased motorcycle shipments, higher gross margin and lower restructuring costs compared with the third quarter of 2012.

Harley-Davidson shipped 54,025 motorcycles to dealers and distributors worldwide during the quarter, which was in line with its guidance. Shipments in the quarter increased 2.3% from 52,793 motorcycles in the third quarter of 2012.

Harley-Davidson's worldwide dealer retail sales of new motorcycles scaled up 15.5% to 70,517 units. In the U.S., shipments improved 20.1% to 48,529 units from the year-ago quarter.

In international markets, shipments went up 6.5% to 21,988 motorcycles. Shipments rose 10% in the Asia Pacific region, 15.6% in the Latin America region, 1.6% in the Europe, Middle East, and Africa (EMEA) region and 7% in Canada.

Retail sales benefited from the launch of revamped motorcycles under the Project Rushmore line, which resulted in a double-digit growth in touring motorcycle sales.

Revenues from Parts and Accessories increased 7% to $250.2 million, while revenues from General Merchandise - which includes MotorClothes apparel - declined 12.6% to $66.1 million.

Harley-Davidson Financial Services (HDFS)

Revenues in the Financial Services segment improved 1.5% to $163.4 million in third-quarter 2013. Further, operating income increased 5.1% to $76.1 million from $72.4 million in the prior-year quarter. Operating income had favorable impacts from higher net interest income.

Restructuring Activities

In third-quarter 2013, Harley-Davidson recorded a restructuring charge of $0.6 million compared with restructuring expenses of $9.2 million in the year-ago period. Upon the completion of restructuring activities in 2013, the company expects one-time overall costs of roughly $485 million, including approximately $3 million in 2013.

Harley-Davidson anticipates savings of approximately $305 million in 2013 from the activities initiated in 2009, leading to annual savings of approximately $320 million from 2014.

Financial Position

Harley-Davidson had cash and cash equivalents of $1.03 billion as of Sep 29, 2013, down from $1.8 billion as of Sep 30, 2012. Long-term debt decreased to $4.07 billion from $4.47 billion as of Sep 30, 2012.

In the first nine months of 2013, Harley-Davidson's operating cash flow improved to $825.1 million from $712.5 million in the prior-year period. Capital expenditures increased to $111.7 million from $95.3 million in the first nine months of 2012.

Share Buyback

Harley-Davidson spent $92.8 million to repurchase 1.6 million shares in third-quarter 2013. The company had remaining authorization to buyback 11 million shares at the end of the quarter.

Looking Forward

For 2013, Harley-Davidson reiterated its shipment guidance of 259,000 to 264,000 motorcycles to dealers and distributors worldwide. The company affirmed the guidance for gross margin between 35.25% and 36.25% and capital expenditures between $200 million and $220 million for full year 2013.

Our Take

Harley-Davidson commands roughly 50% share of the U.S. market, providing scale advantages over most competitors. Furthermore, the company maintains an extremely strong franchise.

Currently, the company retains a Zacks Rank #2 (Buy). In the same industry, Ford Motor Co. ( F ), General Motors ( GM ) and Honda Motor Co. ( HMC ), each carrying a Zacks Rank #2 (Buy), are worth a look at the moment.

FORD MOTOR CO (F): Free Stock Analysis Report

GENERAL MOTORS (GM): Free Stock Analysis Report

HONDA MOTOR (HMC): Free Stock Analysis Report

HARLEY-DAVIDSON (HOG): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: F , GM , HMC , HOG



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