) credit rating was upped to 'A-' from 'BBB+' by Standard &
Poor's (S&P) Ratings Services. Thus, the rating agency has
assigned a stable outlook for the company.
The revision in Harley-Davidson's rating is based on the
company's solid second quarter performance together with the
company's recovery from the impact of recession. In addition,
Harley-Davidson emphasizes on boosting manufacturing efficiency
and selling its higher priced motorcycles.
Rating affirmations or upgrades from credit rating agencies play
an important part in retaining investor confidence in the stock
as well as maintaining credit worthiness in the market.
Harley-Davidson posted a 13.1% rise in earnings to $1.21 per
share in the second quarter of 2013 from $1.07 in the same
quarter of prior year. Earnings surpassed the Zacks Consensus
Estimate by 4 cents. Net income increased 9.9% to $271.7 million
from $247.3 million a year ago.
Consolidated revenues improved 3.5% to $1.79 billion, exceeding
the Zacks Consensus Estimate of $1.63 billion. The increase in
sales and earnings during the quarter were attributable to higher
motorcycle shipments and continued improvement in operating
For 2013, Harley-Davidson reiterated its guidance of 259,000 to
264,000 motorcycles for shipment to dealers and distributors
worldwide. For the third quarter of 2013, the company expects to
ship 51,000 to 56,000 motorcycles compared with 52,793
motorcycles shipped a year ago.
Harley-Davidson focuses on selling its bigger, premium-priced
motorcycles. However, we are concerned about the aging customer
base of the company. The company is unable to attract younger
generations, who are driven toward smaller and cheaper bikes like
those made by Japanese manufacturers
Honda Motor Co., Ltd.
), Suzuki and Yamaha. Harley-Davidson offers an expensive product
range, which attracts only premium consumers. The problem has
become more pronounced amid the current economic environment with
low consumer purchasing power.
Nevertheless, 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, Harley-Davidson retains a Zacks Rank #3 (Hold). In the
Ford Motor Co.
Tesla Motors, Inc.
), each carrying a Zacks Rank #2 (Buy), are worth a look at the
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