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Harley-Davidson (HOG) to Report Q3 Earnings: What's Up?

Zacks Equity Research

Harley-Davidson, Inc. HOG is set to beat earnings estimates when it releases third-quarter 2019 results on Oct 22, before the opening bell. The current Zacks Consensus Estimate for the quarter to be reported is earnings of 51 cents per share on revenues of $1.04 billion.

The American motorcycle manufacturer came up with better-than-expected results in the last reported quarter. However, the bottom line fell 4% year over year amid weaker U.S. and international retail sales.

As far as earnings surprises are concerned, Harley Davidson surpassed the Zacks Consensus Estimate in three of the last four quarters. Investors are keeping their fingers crossed and hoping that the company can continue winning ways by surpassing earnings estimates this time around as well. Encouragingly, our model also indicates that Harley Davidson may beat on earnings in the to-be-reported quarter.

Harley-Davidson, Inc. Price and EPS Surprise

 

Harley-Davidson, Inc. Price and EPS Surprise

Harley-Davidson, Inc. price-eps-surprise | Harley-Davidson, Inc. Quote

Which Way are Top and Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for third-quarter earnings per share has been upwardly revised by a penny in the past seven days to 51 cents. However, this indicates a 34% decline from the year-ago reported figure. The Zacks Consensus Estimate for revenues is pegged at $1.037 million, suggesting a fall of 7.7% from the prior-year quarter.

Why a Likely Positive Surprise?

Our proprietary model shows that Harley Davidson is likely to beat earnings estimates in the to-be-reported quarter, as it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.70%. This is because the Most Accurate Estimate for earnings is pegged a penny above the Zacks Consensus Estimate of 51 cents per share. A favorable Earnings ESP serves as a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: Harley Davidson currently carries a Zacks Rank #3. A Zacks Rank #3, when combined with a positive ESP, makes us confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors at Play

Harley-Davidson’s efforts to launch lighter motorcycles and bolster dealer networks are likely to have positively impacted third-quarter performance of the firm. Apart from adding dealerships globally, the company also launched a program to improve response time, and the quality of online and in-dealership leads.The positives of this initiativeare expected to get reflected in the upcoming results.

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.

Nonetheless, softness in the U.S. market and tariffs from the European Union and China on Harley Davidson motorbikes are likely to have dented sales volume and top line in the third quarter. Evidently, the Zacks Consensus Estimate for total worldwide retail sales is pegged at 56,510 units, which indicates a decline of 4.6% on a year-over-year basis. As such, the estimates for revenues from the sale of motorcycles in the third quarter are pegged at $760 million, suggesting a 7.5% year-over-year decline. On a positive note, the estimates of revenues from financial services is pegged at $198 million, implying growth from the year-ago figure of $192 million.

During the second-quarter earnings call, the company stated that it expects total motorcycle shipments in the quarter to be reported within 43,000-48,000 units. The Zacks Consensus Estimate for the same is pegged at 45,402 units, which points to a year-over-year decline of 6.6%.

All in all, while lower sales across the markets in the United States, Europe and China 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 third-quarter earnings.

Other Stocks to Consider

Harley-Davidson is not the only energy firm looking up this earnings season. Here are some other companies from the same space, which according to our model also have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Tesla, Inc. TSLA has an Earnings ESP of +116.67% and a Zacks Rank #2. The stock is set to report third-quarter 2019 earnings on Oct 23.

Veoneer, Inc. VNE has an Earnings ESP of +7.17% and a Zacks Rank #2. The stock is set to report third-quarter 2019 earnings on Oct 23.

Asbury Automotive Group, Inc. ABG has an Earnings ESP of +4.53% and a Zacks Rank #3. The stock is set to report third-quarter 2019 earnings on Oct 22.

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