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What's in Store for Harley-Davidson (HOG) in Q3 Earnings?

Harley-Davidson, Inc.HOG is set to report third-quarter 2015 results on Oct 20. In the last quarter, the company had delivered a positive earnings surprise of 3.60%. Let us see how things are shaping up for this announcement.

Factors Influencing this Quarter

The operating income of Harley-Davidson's Financial Services segment has finally started improving after consecutive declines in 2013 and 2014. It improved 6.5% year over year in the first half of 2015. Moreover, the company now expects it to increase for the full year, compared with the previous guidance of a year-over-year decline. Thus, the segment's operating income is anticipated to increase in the third quarter as well.

Further, Harley-Davidson expects shipments of 54,000-59,000 motorcycles in the third quarter of 2015, which is significantly higher than 50,670 motorcycles shipped in the year-ago period. If the company is able to meet the guidance, it will have a positive impact on revenues in the quarter.

However, Harley-Davidson's worldwide dealer retail sales of new motorcycles went down 1.4% to 145,592 units in the first half of 2015 due to weaker retail sales in the U.S, Canada, Latin America and EMEA. Shipments also declined 4.7% to 164,761 motorcycles in first-half 2015. Lower shipments and unfavorable foreign currency exchange resulted in a 6.2% fall in consolidated revenues to $3.5 billion in the first half of the year. Thus, it remains to be seen whether the company can meet its shipment growth guidance, or if the trend of the first half continues in the third quarter as well.

Earnings Whispers

Our proven model does not conclusively show that Harley-Davidson is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP for Harley-Davidson is currently pegged at +3.80%. This is because the Most Accurate estimate of 82 cents stands above the Zacks Consensus Estimate of 79 cents.

Zacks Rank: Harley-Davidson currently has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Advance Auto Parts Inc. AAP has an Earnings ESP of +1.94% and a Zacks Rank #2 (Buy). The company's third-quarter 2015 financial results are scheduled for release on Nov 12.

General Motors Company GM has an Earnings ESP of +1.74% and a Zacks Rank #3 (Hold). The company is expected to report third-quarter 2015 results on Oct 21.

American Axle & Manufacturing Holdings Inc. AXL has an Earnings ESP of +1.47% and a Zacks Rank #3. The company is expected to release third-quarter 2015 earnings results on Oct 30.

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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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