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Harley-Davidson (HOG) Q4 Earnings Top, Sales Lag Estimates

Zacks Equity Research

Harley-Davidson, Inc. HOG reported earnings per share of 22 cents in fourth-quarter 2019, surpassing the Zacks Consensus Estimate of 5 cents and increasing from 17 cents per share in the prior-year period. This outperformance resulted from higher-than-expected motorcycle sales in the Asia Pacific region. Precisely, retail motorcycle sales in the Asia-Pacific region totaled 7,691 units, topping the consensus mark of 7,348 units.

The company’s net income amounted to $13.5 million compared with the year-ago quarter’s $495,000.

Total revenues from Motorcycle and Related products, which form bulk of overall revenues of the firm, declined 8.5% year over year to $874.1million in the reported quarter. The top line also missed the Zacks Consensus Estimate of $930 million. The company reported consolidated revenues (including motorcycle sales and financial services revenues) of $1.07 billion, declining6.5% year over year.

Harley-Davidson, Inc. Price, Consensus and EPS Surprise

Segmental Highlights

Motorcycles and Related Products: In the fourth quarter, operating loss from the Motorcycles and Related Products segment amounted to $46.4 million, narrower than a loss of $59.5 million reported in the year-ago period. Higher sales from the Asia-Pacific region and lower operating costs from the company's manufacturing-optimization initiativecan be attributed to the same.

In the quarter ended Dec 31, 2019, it shipped 40,454 motorcycles, down 7% year over year.

Harley-Davidson’s worldwide retail motorcycle units sold edged down 1.4% to 38,754 from 39,311 in the year-ago quarter. Harley-Davidson’s retail motorcycle units sold in the United States also declined 3.1% from the year-ago quarter to 20,204. International units sold increased 0.5% to 18,550 motorcycles from 18,462 in the prior-year quarter. Sales in the Middle East and Africa, Canada and Latin America declined 2.3%, 14.1% and 0.1%, respectively. Nonetheless, in the Asia Pacific, sales increased 6.2% from the year-ago period.

Revenues for Parts & Accessories fell 9.1% from a year ago to $129.3 million. The same for General Merchandise — including Motor Clothes apparel and accessories — declined 2.2% from the prior-year quarter to $57.2 million.

Financial Services: Revenues for Harley-Davidson Financial Services increased to $198.2 million from the prior-year quarter’s $190.2 million. However, operating income declined 7% to $58.8 million from $63.3 million in the year-ago quarter.

Financial Position

Harley-Davidson had cash and cash equivalents of 833.8 million as of Dec 31, 2019. Net long-term debt increased to $5,124 million from $4,887 million in the year-ago period.Its debt-to capital ratio was 74% at the end of the quarter.

During the year, the American motorcycle maker bought back $286.7 million shares and hiked payout by 1.4% to $1.50 per share.

As of Dec 31, 2019, the company’s net operating cash inflow was $868.3 million compared with $1,206 million on Dec 31, 2018. Capital expenditure in 2019 was $181.4 million compared with $213.5 million recorded in 2018.

Looking Forward

For full-year 2020, Harley-Davidson projects Motorcycle segment revenues in the band of $4.53-$4.66 billion. For first-quarter 2020, it expects Motorcycle segment revenues within $1.09-$1.17 billion.

The motorcycles segment operating margin, as a percentage of revenues, is expected in the band of 7-8% for the full year. Operating income from the Financial Services segment is expected to be flat year over year. Capex is projected between $215 million and $235 million.

Zacks Rank and Key Picks

Harley Davison currently carries a Zacks Rank #4 (Sell). The stock has depreciated 9.5% against the industry’s rally of 34.2% over the past year.

Some better-ranked stocks in the Auto-Tires-Trucks sector include Gentex Corporation GNTX, Tesla, Inc. TSLA and SPX Corporation SPXC, each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gentex has an estimated earnings growth rate of 7.3% for 2020. The company’s shares have appreciated 34.6% in a year’s time.

Tesla has a projected earnings growth rate of 6,460% for the current year. Its shares have surged 87.6% over the past year.

SPX has an expected earnings growth rate of 8.1% for the current year. The stock has rallied 74% in the past year.

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Click to get this free report Tesla, Inc. (TSLA) : Free Stock Analysis Report Gentex Corporation (GNTX) : Free Stock Analysis Report SPX Corporation (SPXC) : Free Stock Analysis Report Harley-Davidson, Inc. (HOG) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research