Will Harley-Davidson Fall on Weak Earnings this Quarter?

Photo Credit: Cristian Janke

Harley-Davidson, Inc. (HOG) Consumer Discretionary - Automobiles | Reports April 19, Before Market Opens

Key Takeaways

• The Estimize consensus is calling for EPS of $1.31 on $1.51 billion in revenue, 2 cents higher than Wall Street on the bottom line and $17 million greater on the top
• Harley is slowly losing its market dominance as young riders are opting for low cost sport bikes over lavish v-twin cruisers
• As of December 2015, Harley reported cash and cash equivalents of $722.2 million, down from $906.7 million the year prior, and $1.06 billion in 2013
• What are you expecting for HOG? Get your estimate in here!

Over the past few years, the U.S. automotive industry has made a roaring comeback to prominence. In fact, domestic sales broke a 15 year record last year as the car industry continues to benefit from cheap oil, employment gains and low interest rates. Unfortunately, this hasn’t translated to the motorcycle industry and Harley Davidson. Despite strong earnings last quarter, expectations have been subdued for the chopper company. The Estimize consensus is calling for EPS of $1.31 on $1.51 billion in revenue, 2 cents higher than Wall Street on the bottom line and $17 million greater on the top. Earnings are predicted to grow 3% compared to a year earlier while sales are looking flat. The market has reacted quite negatively to the stock which is down 23.5% in the past 12 months. Speculation of waning motorcycle demand on top of a slew of headwinds could have an adverse impact on earnings in the near term.

Harley is slowly losing its market dominance as young riders are opting for low cost sport bikes over lavish v-twin cruisers. Revenue has followed this evolving trend and is now expected to be flat from a year earlier and down from two years prior. Harley’s initiatives to expand its product portfolio, while great for the future, has weighed down its financial position. In the past two years, the company has increased its debt burden and depleted cash reserves in an effort to reinvigorate growth. As of December 2015, Harley reported cash and cash equivalents of $722.2 million, down from $906.7 million the year prior, and $1.06 billion in 2013. Total debt has also been worse off, increasing to $6.89 billion from $5.5 billion in the same time frame. It wouldn’t be surprising if these numbers come down even further as Q1 results are likely to be weighed down by economic weakness, unfavorable exchange rates and aggressive competitor pricing.