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.
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.
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.
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.
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.
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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