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Harley-Davidson (HOG) Q4 Earnings Coming Up: What to Expect

Zacks Equity Research

Harley-Davidson, Inc. HOG is set to beat earnings estimates when it releases fourth-quarter 2019 results on Jan 28, before the opening bell. The Zacks Consensus Estimate for the quarter to be reported is earnings of 5 cents per share on revenues of $924.9 million.The Zacks Consensus Estimate for fourth-quarter earnings per share has been revised down by a penny in the past 30 days.

The American motorcycle manufacturer came up with better-than-expected results in the last reported quarter on the back of higher-than-expected sales in the firm’s motorcycle and related products segment.

As far as earnings surprises are concerned, Harley Davidson surpassed the Zacks Consensus Estimate in three of the last four quarters. Investors are hoping that the company can come up with an earnings beat this time around as well. However, our model does not indicate an earnings beat for Harley Davidson for the to-be-reported quarter.

Harley-Davidson, Inc. Price and EPS Surprise

Factors at Play

Harley-Davidson’s efforts to launch lighter motorcycles and bolster dealer networks are likely to have positively impacted third-quarter performance. In addition to adding dealerships globally, launching dealer digital programs and lead-management tools is likely to have aided the firm. Harley-Davidson’s initiatives to lower expenses are expected to have boosted margins in the quarter to be reported. The company has been working on the plan of manufacturing optimization to restructure its cost arrangement and optimize the product manufacturing process, which is expected to have aided the to-be-reported quarter’s earnings.

However, the motorcycle maker is likely to have faced a decline in sales volumes amid industry headwinds.During the third-quarter earnings call, the company stated that it expects total motorcycle shipments in the quarter to be reported within 38,500-43,500 units. The Zacks Consensus Estimate for the same is pegged at 40,603 units, which points to a year-over-year decline of 6.6%.

The Zacks Consensus Estimate for total worldwide retail sales is pegged at 38,297 units, which indicates a decline of 2.6% on a year-over-year basis. The consensus estimate for fourth-quarter sales in the U.S. and EMEA market is pegged at 20,015 and 7,132 units, indicating year-over-year decline of 4% and 3%, respectively. Meanwhile, sales from the Asia Pacific market are estimated to be 7,348 units, suggesting an improvement from 7,244 units in the year-ago quarter. While China sales are likely to have increased year over year, softness in U.S. and European markets is likely to have dented overall sales volume and top line in the fourth quarter. 

As such, the consensus mark for revenues from the sale of motorcycles for the fourth quarter is pegged at $709 million, suggesting a 3.9% year-over-year decline. On a positive note, the consensus estimate for revenues from financial services is pegged at $195 million, implying growth from the year-ago figure of $190 million.

All in all, while lower sales in the United States and Europe amid macro-economic headwinds may have limited profits, Harley-Davidson’s strong dealership network and cost-containment initiatives are likely to have had a positive impact on the firm’s fourth-quarter earnings.

What Our Model Suggests

The proven Zacks model does not conclusively predict an earnings beat for Harley-Davidson this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, Harley-Davidson has a Zacks Rank #4 (Sell) and an Earnings ESP of +117.39%

Stocks Worth a Look

Here are a few auto stocks worth considering as these have the right combination of elements to beat on earnings in the upcoming releases.

PACCAR Inc. PCAR has an Earnings ESP of +0.78% and a Zacks Rank #2. The company is slated to release fourth-quarter 2019 earnings on Jan 28. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lear Corporation LEA is set to report fourth-quarter 2019 earnings on Jan 28. The company has an Earnings ESP of +10.04% and a Zacks Rank #3.

Tesla TSLA is set to report fourth-quarter 2019 earnings on Jan 29. The company has an Earnings ESP of +3.34% and a Zacks Rank #2.

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Click to get this free report Tesla, Inc. (TSLA) : Free Stock Analysis Report PACCAR Inc. (PCAR) : Free Stock Analysis Report Lear Corporation (LEA) : Free Stock Analysis Report Harley-Davidson, Inc. (HOG) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research