A month has gone by since the last earnings report for Harley-Davidson (HOG). Shares have lost about 0.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Harley-Davidson due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Harley-Davidson Posts Q2 Loss
Harley-Davidson reported second-quarter 2020 loss of 60 cents per share against the Zacks Consensus Estimate of earnings of 6 cents, as coronavirus shutdowns sapped motorcycle sales. In the year-ago quarter, the company recorded earnings of $1.23 per share. Notably, the Motorcycles and Related Products segments swung to an operating loss of $121 million against the consensus mark of earnings of $9.03 million. High restructuring costs also weighed on the firm’s results.
Total revenues from Motorcycle and Related products, which constitute bulk of the firm’s overall revenues, declined 53.3% year over year to $669 million in the reported quarter. The top line also missed the Zacks Consensus Estimate of $798 million. The company reported consolidated revenues (including motorcycle sales and financial services revenues) of $865 million, down 47% year over year.
Motorcycles and Related Products: The Motorcycles and Related Products segment incurred an operating loss of $121 million against operating income of $181 million reported in the year-ago period. This decline was mainly due to lower productivity and suspension of global motorcycle manufacturing during most of the quarter amid the coronavirus crisis. In the quarter under review, the company shipped 28,369 motorcycles, down 59% year over year.
Harley-Davidson’s worldwide retail motorcycle units sold dropped to 52,712 from the year-ago quarter’s 71,846. The company’s retail motorcycle units sold in the United States declined 27% from the year-ago quarter to 31,340. International units sold decreased 26% year over year to 19,100 motorcycles. Sales in the Middle East and Africa, Asia Pacific, Canada and Latin America declined 30%, 10%, 30% and 51%, respectively, from the year-ago period.
Revenues for Parts & Accessories fell 24% from the prior year to $169 million. The same for General Merchandise — including Motor Clothes apparel and accessories — declined 42% from the prior-year quarter to $38 million.
Financial Services: Revenues for Harley-Davidson Financial Services decreased to $196 million from the prior-year quarter’s $199 million. Operating income slumped 94% to $5 million from the year-ago quarter’s $76 million due to increasing provision for loan losses amid coronavirus blues.
Harley-Davidson had cash and cash equivalents of $3,856 million as of Jun 28, 2020. Net long-term debt increased to $6,488.5 million from the year-ago period’s $4,650.2 million.
The firm generated $610.2 million of cash from operating activities in first-half 2020 compared with $496.2 million in the comparable year-ago period. Capital expenditure in the first six months of 2020 was $67 million compared with $83.2 million recorded in corresponding period of 2019.
While the company suspended discretionary share repurchases, it paid a cash dividend of 2 cents per share during second-quarter 2020. Third-quarter dividend of 2 cents per share will be paid on Sep 25 to shareholders of record as of Sep 10.
Given coronavirus-induced uncertainty, Harley-Davidson refrains from providing any outlook and forecast for full-year 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Harley-Davidson has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Harley-Davidson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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