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Harley-Davidson (HOG) Q1 Earnings Beat Estimates, Falls Y/Y

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Harley-Davidson, Inc. HOG reported adjusted earnings of $1.03 per share in first-quarter 2018, beating the Zacks Consensus Estimate of 89 cents. Adjusted earnings in the year-ago quarter were $1.05.

Net income decreased to $174.8 million from $186.4 million registered a year ago.

Motorcycle and related products revenues rose to $1.36 billion in the reported quarter compared with $1.33 billion in the prior-year quarter. The figure surpassed the Zacks Consensus Estimate of $1.26 billion. The company also logged consolidated revenues of $1.54 billion, improving from the prior-year figure of $1.5 billion.

Harley-Davidson, Inc. Price, Consensus and EPS Surprise

Harley-Davidson, Inc. Price, Consensus and EPS Surprise | Harley-Davidson, Inc. Quote

Operating income declined to $236 million from $289 million in the year-ago period.

Motorcycles and Related Products

Operating income from Motorcycles and Related Products declined to $172.8 million from $236.5 million recorded a year ago.

The company shipped 63,944 motorcycles during the quarter under review compared with 70,831 shipments in first-quarter 2017.

Harley-Davidson’s retail motorcycle sales in the United States declined 12% to 29,309 units. International sales gained 0.2% to 21,777 motorcycles from 21,733 in the prior-year quarter. During the quarter, Latin America and the Middle East and Africa (EMEA) region sales gained 7% and 6.8%, respectively, while Canada and Asia-Pacific region’s sales reduced 11.9% and 7.8%, respectively.

Harley-Davidson’s worldwide retail motorcycle sales fell 7.2% to 51,086 units from 55,049 motorcycles in the year-ago quarter.

Revenues from Parts and Accessories gained 0.6% to $169 million. Similarly, the metric for General Merchandise — including MotorClothes apparel and accessories — rose 1.4% to $56.6 million.

Harley-Davidson Financial Services (HDFS)

Revenues in the Financial Services segment rose 2.9% to $178 million in first-quarter 2018. Operating income improved 20.8% to $63.6 million from the year-ago figure of $52.6 million.

Financial Position

Harley-Davidson had cash and cash equivalents of $753.5 million as of Apr 1, 2018, compared with $839.7 million as of Mar 26, 2017. Long-term debt was lowered to $4.1 billion from $5.3 billion as of Mar 26, 2017.

For the fiscal year ending Dec 31, 2017, Harley-Davidson’s operating cash inflow rose to $192 million from $160 million a year-ago. Capital expenditures increased to $28.4 million from $24 million in the preceding year period.

Share Repurchase

During first-quarter 2018, the company repurchased 1.4 million of common shares for $65.1 million. At the quarter-end, 24.2 million shares remained on board-approved share repurchase authorizations.

Looking Forward

For 2018, Harley-Davidson reaffirmed its full-year motorcycle shipments to be 231,000-236,000 units. Also, for second-quarter 2018, it expects motorcycle shipments to be approximately 67,500-72,500 units.

Moreover, for 2018, the company anticipates capital expenditures of $250-$270 million. Further, the operating margin is estimated at nearly 9.5-10.5%.

Zacks Rank & Key Picks

Harley-Davidson carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Honda Motor Co., Ltd. HMC, Dana Incorporated DAN and BorgWarner Inc. BWA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Honda has expected long-term growth rate of 4.8%. Over a year, shares of the company have gained 18%.

Dana has expected long-term growth rate of 10%. Shares of the company have risen 32.9% in the past year.

BorgWarner has expected long-term growth rate of 8.6%. Over a year, shares of the company have gained 29.9%.

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