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Why Is Harley-Davidson (HOG) Down 6.9% Since Last Earnings Report?

Zacks Equity Research
In the latest trading session, Construction Partners (ROAD) closed at $13.75, marking a +0.22% move from the previous day.

It has been about a month since the last earnings report for Harley-Davidson (HOG). Shares have lost about 6.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Harley-Davidson due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Harley-Davison Q1 Earnings Beat Estimates, Down Y/Y

Harley’s earnings per share were 80 cents in first-quarter 2019, which surpassed the Zacks Consensus Estimate of 67 cents. In the prior-year quarter, the figure was $1.24 per share.

The company’s net income was $127.9 million compared with $174.8 million registered a year ago.

Revenues from the Motorcycle and Related Products segment declined 12.3% year over year to $1.2 billion in the reported quarter, which missed the Zacks Consensus Estimate of $1.22 billion. The company reported consolidated revenues of $1.38 billion, marking a decline from the prior-year quarter’s $1.54 billion. This fall was majorly due to declining worldwide retail unit sale.

Motorcycles and Related Products

In first-quarter 2019, operating income from the Motorcycles and Related Products segment was $108.4 million compared with operating income of $172.8 million in the year-ago quarter. This fall in income was due to lower revenues, unfavorable product mix and increased tariffs.

In the quarter ending on Mar 31, the company shipped 58,891 motorcycles compared with 63,944 units in first-quarter 2018.

Harley-Davidson’s retail motorcycle units sold in the United States declined 4.2% to 28,091. International units sold declined 3.3% to 21,060 motorcycles from 21,777 in the prior-year quarter. During the reported quarter, sales across all markets experienced declines. Sales in the Middle East and Africa (EMEA), the Asia Pacific, Latin America, and Canada declined 0.6%, 4%, 10.6% and 6.3%, respectively.

Harley-Davidson’s worldwide retail motorcycle units sold declined 3.8% to 49,151 from 51,086 in the year-ago quarter.

Revenues from the Parts & Accessories segment decreased 5.5% to $159.7 million. Moreover, the metric for General Merchandise — including MotorClothes apparel and accessories — lost 2.1% to $55.4 million.

Harley-Davidson Financial Services

Revenues for Harley-Davidson Financial Services (“HDFS”) were $188.7 million compared with $178.2 million recorded in the prior-year quarter. Operating income declined 7.6% to $58.7 million from $63.6 million in the year-ago quarter.

Financial Position

Harley-Davidson had cash and cash equivalents of $749 million as of Mar 31, 2019, compared with $753.5 million as of Apr 1, 2018. Net long-term debt rose to $4.74 billion from $4.12 billion as of Apr 1, 2018.

At the end of the first quarter, the company’s net operating cash inflow was $32.7 million compared with $191.6 million a year ago. Capital expenditure was $32.6 million compared with $28.4 million in the prior-year period.

Looking Forward

For 2019, Harley-Davidson reiterated the full-year motorcycle shipments projection of 217,000-222,000 motorcycles. Further, for second-quarter 2019, it expects motorcycle shipments to be approximately 65,500-70,500 units.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.67% due to these changes.

VGM Scores

Currently, Harley-Davidson has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.



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