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Harley-Davidson Misses on Q3 Earnings, Lowers Guidance

Harley-Davidson, Inc.HOG reported earnings of 69 cents per share in the third quarter of 2015 which were in line with the year-ago quarter. However, earnings missed the Zacks Consensus Estimate of 78 cents. Net income decreased to $140.3 million from $150.1 million a year ago.

Harley-Davidson Inc. - Earnings Surprise | FindTheBest

Consolidated revenues improved 1.5% to $1.32 billion. Operating income fell 3.7% to $215.8 million from $224.1 million in the third quarter of 2014.

Motorcycles and Related Products

Revenues from Motorcycles and Related Products declined to $1.14 billion in third-quarter 2015 from $1.13 billion in the year-ago quarter. Also, the figure missed the Zacks Consensus Estimate of $1.21 billion.

Operating income from Motorcycles and Related Products decreased to $143.1 million from $146.3 million a year ago.

Revenues from Harley-Davidson motorcycles fell 0.4% to $812.4 million. Harley-Davidson shipped 53,472 motorcycles to dealers and distributors worldwide during the third quarter of 2015, compared with 50,670 shipments in third-quarter 2014.

Harley-Davidson's worldwide dealer retail sales of new motorcycles went down 1.4% to 72,178 units from 73,217 motorcycles sold in the year-ago quarter. Sales in the U.S dropped 2.5% to 48,918 motorcycles. International sales went up 0.9% to 23,260 motorcycles from 23,050 motorcycles sold in the prior-year quarter. An improvement of 5.1% in sales in the Asia-Pacific region and 2.4% in the Europe, Middle East, and Africa ("EMEA") region, was partially offset by an 11.5% decline in the Latin America region, and a 1.7% decrease in Canada.

Revenues from Parts and Accessories increased 5.2% to $252.2 million, while revenues from General Merchandise - which includes MotorClothes apparel and accessories - declined 0.4% to $69 million.

Harley-Davidson Financial Services (HDFS)

Revenues in the Financial Services segment rose 3.5% to $177.1 million in third-quarter 2015. Operating income decreased 6.4% to $72.8 million from $77.8 million in the year-ago quarter, due to a growing loan portfolio with higher provision for credit losses, partially offset by favorable net interest margin.

Financial Position

Harley-Davidson had cash and cash equivalents of $1.37 billion as of Sep 27, 2015, compared with $979.9 million as of Sep 28, 2014. Total debt increased to $6.94 billion from $5.44 billion as of Sep 28, 2014.

In the first nine months of 2015, Harley-Davidson's operating cash flow improved to $1.02 billion from $966.9 million in the same period a year ago. Capital expenditures increased to $139.1 million from $120.3 million in the first nine months of 2014.

Share Repurchases

Harley-Davidson spent $536 million to repurchase 9.4 million shares in the third quarter of 2015. As of Sep 30, 2015, Harley-Davidson had remaining authorization to buy back nearly 21.6 million shares.

Looking Forward

Harley-Davidson reduced its guidance for motorcycle shipments in 2015 to 265,000-270,000 units from 276,000-281,000 units projected earlier due to weaker-than-expected third-quarter results. This means that shipments are anticipated to be consistent with the year-ago level or decline up to 2% year over year.

Harley-Davidson also reduced the guidance for operating margin from the Motorcycle segment to the range of 16-17% from 18-19% expected earlier. It affirmed the capital expenditure guidance of $240-$260 million for 2015.

In the fourth quarter of 2015, Harley-Davidson expects to ship 47,000-52,000 motorcycles, compared with 47,157 motorcycles shipped in the year-ago period. The company plans to incur one-time expenses of around $30-$35 million in the fourth quarter, mainly for employee separation and reorganization costs.

In 2016, Harley-Davidson intends to increase marketing expenses by 65% and product development expenses by 35% year over year, to boost demand. This should lead to additional investment of nearly $70 million.

Zacks Rank

Currently, Harley-Davidson carries a Zacks Rank #4 (Sell). Better-ranked automobile stocks include AutoNation, Inc. AN , Lithia Motors Inc. LAD and Penske Automotive Group, Inc. PAG . Penske currently sports a Zacks Rank #1 (Strong Buy), while both AutoNation and Lithia Motors carry a Zacks Rank #2 (Buy).

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PENSKE AUTO GRP (PAG): Free Stock Analysis Report

AUTONATION INC (AN): Free Stock Analysis Report

HARLEY-DAVIDSON (HOG): Free Stock Analysis Report

LITHIA MOTORS (LAD): Free Stock Analysis Report

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


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

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