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Why Is Harley-Davidson (HOG) Up 13.5% Since Last Earnings Report?

It has been about a month since the last earnings report for Harley-Davidson (HOG). Shares have added about 13.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Harley-Davidson due for a pullback? 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 drivers.

Harley-Davidson Q3 Earnings Beat, Segment Sales Rise Y/Y

Harley-Davidson reported third-quarter 2022 adjusted earnings of $1.78 per share, beating the Zacks Consensus Estimate of $1.45. Higher-than-anticipated revenues from the Motorcycles & Related Products and Financial Services segments resulted in this outperformance. The bottom line also shot up 70% from $1.05 per share reported in the year-ago quarter.

The motorcycle manufacturer generated consolidated revenues (including motorcycle sales and financial services revenues) of $1,649 million, rising 21% from the year-earlier quarter.

Segmental Highlights

Motorcycles and Related Products: Total revenues from the Motorcycle and Related products segment, which constitute the bulk of the firm’s overall revenues, increased 24% on a year-over-year basis and came in at $1,437 million. The figure also outpaced the consensus mark of $1,327 million. The operating income from the segment skyrocketed 164% to $258 million and surpassed the Zacks Consensus Estimate of $179 million.

In the quarter under review, revenues from the sale of motorcycles came in at $1,134 million, rising 28% year over year and crossing the consensus mark of $1,002 million. The company’s global shipments came at 57,061 motorcycles, growing 19%.

During the reported quarter, Harley-Davidson retailed 49,604 motorcycle units globally, down 2% year over year. Its retail motorcycle units sold in North America declined 5% to 32,154. Meanwhile, sales in the EMEA (Europe, Middle East and Africa) and Latin America decreased 4% and 27%, respectively, while that in the Asia Pacific increased 18%.

Revenues for Parts & Accessories were down 2% from a year ago to $201 million and missed the consensus mark of $217 million. Revenues from Apparel went up 41% from the prior-year quarter to $70 million and crossed the consensus mark of $60 million.

Financial Services: Revenues for Harley-Davidson Financial Services totaled $212 million, up 3% year over year and crossed the consensus mark of $208 million. Operating income declined 24% to $81 million and missed the consensus mark of $98 million.

Financial Position

In the third quarter, selling, general and administrative expenses increased 9.6% to $232.5 million from $212.2 million in the year-ago quarter. The firm generated $331 million of cash from operating activities. The company paid dividends of 15.75 cents per share in the reported quarter. It repurchased $12 million in shares in the quarter.

Harley-Davidson had cash and cash equivalents of $1,730.2 million as of Sep 25, 2022, significantly down from the $2,061.3 million as of Sep 26, 2021. In the same period, the long-term debt decreased to $4,738.2 million from $4,876.3 million recorded as of Sep 26, 2021.

2022 Guidance

For 2022, the company has restated its previous guidance and projections for revenues and operating income. It continues to expect revenues from the motorcycles segment to grow in the band of 5-10% for the current year. Harley-Davidson has also kept the operating income margin expectation for the segment intact at 11-12%. HOG still expects its operating income for Financial Services to decline 20-25%. Capital expenditure projection for the full year has been brought down to the range of $170-$190 million from the previously guided range of $190-$220 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -83.19% due to these changes.

VGM Scores

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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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 #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Harley-Davidson is part of the Zacks Automotive - Domestic industry. Over the past month, Paccar (PCAR), a stock from the same industry, has gained 12.5%. The company reported its results for the quarter ended September 2022 more than a month ago.

Paccar reported revenues of $6.69 billion in the last reported quarter, representing a year-over-year change of +41.1%. EPS of $2.21 for the same period compares with $1.08 a year ago.

Paccar is expected to post earnings of $2.21 per share for the current quarter, representing a year-over-year change of +50.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.6%.

Paccar has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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