U.S. Markets closed

Harley Raises Dividend by 35.5%

Zacks Equity Research

Harley-Davidson Inc. (HOG) decided to raise 2013-first quarter dividend by 35.5% to 21 cents from 15.5 cents as it continues to benefit from restructuring activities. The increased dividend will be payable on Mar 1 to shareholders of record as of Feb 19.

Harley believes in a consistent dividend payment policy with raises almost every year. It is only in 2009, that the motorcycle maker reduced dividend sharply by 69.7% to 10 cents from 33 cents owing to waning demand for its motorcycles on the back of global economic recession. After paying the same dividend from 2009 through 2010, the company raised dividend by 25% to 12.5 cents for the second quarter of 2011 and then again by 24% to 15.5 cents for all the quarters in 2012.

Harley posted a 29.2% rise in earnings per share to 31 cents in the fourth quarter of 2012 from 24 cents in the same quarter of 2011. The EPS was in line with the Zacks Consensus Estimate. Net income grew 29.3% to $70.6 million from $54.6 million in the fourth quarter of 2011.

However, consolidated revenues in the quarter slid 0.8% to $1.17 billion in the quarter due to announced plans for lower shipments related to the implementation of seasonal surge production at York facility in the first half of 2013. Nevertheless, it was higher than the Zacks Consensus Estimate of $982 million. Operating income improved 25.7% to $116.1 million, mainly driven by significantly lower restructuring expenses.

For the full year 2012, Harley’s EPS increased 16.7% to $2.72 from $2.33 a year ago. However, the EPS was lower than the Zacks Consensus Estimate of $2.74. Net income gained 13.8% to $623.9 million. Meanwhile, consolidated revenues grew 5.1% to $5.58 billion, exceeding the Zacks Consensus Estimate of $4.91 billion. The improvement in revenues and profits was attributable to the company’s strong product portfolio and positive impact from its restructuring actions.

Harley realized savings of $280.0 million in 2012 from restructuring activities initiated in early 2009. The company incurred restructuring charges of $1.6 million in the quarter and $28.5 million in the year.

Upon completion of restructuring activities in this year, Harley expects restructuring actions to result in one-time overall costs of $495.0 million, including $13.0 million in 2013. The company expects savings of $305.0 million in the year from restructuring activities, leading to annual ongoing savings of $320.0 million beginning in 2014.

In 2013, Harley expects to ship 259,000 to 264,000 motorcycles to dealers and distributors worldwide, reflecting roughly 4.5%–6.5% increase from 2012. In the first quarter of 2013, the company expects to ship 71,000 to 76,000 motorcycles, an increase of 10%–18% from the year-ago quarter. Harley also expects gross margin between 35.25% and 36.25 % for the full year. It expects capital expenditures between $200 million and $220 million for the year.

Since the latest announcement of dividend increase on Feb 5, the company’s shares rose 1.8% to $53.49 after the market closed yesterday, which is close to the 52-week high of $54.62. The stock currently retains a Zacks Rank #3 (Hold).

Few stocks that are performing well in the industry where the company operates include Oshkosh Corporation (OSK) and Commercial Vehicle Group Inc. (CVGI), and STRATTEC SECURITY CORPORATION (STRT). They carry a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on HOG

Read the Full Research Report on OSK

Read the Full Research Report on CVGI

Read the Full Research Report on STRT

Zacks Investment Research

More From Zacks.com