On January 9, we maintained our Neutral recommendation on
Harley Davidson Inc.
), despite its lower earnings in 2012 third quarter, based on its
commanding market share in the U.S and anticipation of increased
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Harley-Davidson posted a 24.4% fall in earnings to 59 cents per
share in the third quarter of 2012 from 78 cents a year ago, due
to lower motorcycle shipments during the launch of an ERP
production system at the assembly plant in York. However,
earnings exceeded the Zacks Consensus Estimate by a penny.
Consolidated revenues fell 10.5% year over year to $1.3 billion,
driven by lower shipments. Nevertheless, it was higher than the
Zacks Consensus Estimate of $1.1 billion.
Following the release of the third quarter results, the Zacks
Consensus Estimate for both 2012 and 2013 remained flat at $2.73
and $3.37 per share, respectively. As a result, the company now
has a Zacks Rank #3 (Hold).
Harley-Davidson enjoys a scale advantage over its peers as it
commands a 50% market share in the U.S. It operates with 706
independent dealers in the U.S., of which 55% exclusively market
its products. It has a network of 1,468 dealers spread across the
The company increased its 2012 shipment guidance to 245,000 to
250,000 motorcycles, which is 5% to 7% higher than 2011. The
increase depicts strong demand for the company's product.
However, Harley-Davidson faces challenges from its aging customer
base. The young generation is more attracted toward smaller and
cheaper bikes manufactured by Japanese manufacturers
Honda Motor Co.
), Suzuki and Yamaha. Even the company's initiative to
manufacture faster, smaller bikes by acquiring Buell and MV
Agusta was not successful.
Other Stocks to Look For
General Motors Company
) are performing well in the same industry, where Harley-Davidson
operates. Both are Zacks Rank #2 (Buy) stocks.