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Harley-Davidson (HOG) Q1 Earnings Beat, View Reaffirmed

Harley-Davidson, Inc. HOG reported earnings of $1.36 per share in the first quarter of 2016, which were higher than $1.27 recorded in the year-ago quarter. Further, earnings surpassed the Zacks Consensus Estimate of $1.28. Net income decreased to $250.5 million from $269.9 million a year ago.

 

 

Consolidated revenues rose 4.8% to $1.75 billion. Operating income declined to $388.8 million from $410.1 million in the first quarter of 2015.

Motorcycles and Related Products

Revenues from Motorcycles and Related Products improved to $1.58 billion in first-quarter 2016 from $1.51 billion in the year-ago quarter. Further, the figure topped the Zacks Consensus Estimate of $1.49 billion. The improvement was driven by higher motorcycle shipments.

Operating income from Motorcycles and Related Products decreased significantly to $332.5 million from $345.5 million a year ago.

Revenues from Harley-Davidson motorcycles improved 5% to $1.32 billion. The company shipped 83,036 motorcycles to dealers and distributors worldwide during the first quarter of 2016, compared with 79,589 shipments in first-quarter 2015.

Harley-Davidson’s worldwide dealer retail sales of new motorcycles improved 1.4% to 57,458 units from 56,661 motorcycles sold in the year-ago quarter. Sales in the U.S dropped 0.5% to 35,326 motorcycles. International sales went up 4.5% to 22,132 motorcycles from 21,173 motorcycles sold in the prior-year quarter. An improvement of 6.6% in sales in the Asia-Pacific region, 8.8% in the Europe, Middle East, and Africa (“EMEA”) region, and 16.3% in Canada was partially offset by a 26.5% decline in the Latin America region.

Revenues from Parts and Accessories dipped 0.1% to $183.7 million, while revenues from General Merchandise – which includes MotorClothes apparel and accessories – improved 6.3% to $70.6 million.

Harley-Davidson Financial Services (HDFS)

Revenues in the Financial Services segment rose 6.8% to $173.4 million in first-quarter 2016. Operating income declined 12.8% to $56.4 million from $64.7 million in the year-ago quarter due to higher provision for retail credit loan losses.

Financial Position

Harley-Davidson had cash and cash equivalents of $694 million as of Mar 27, 2016, compared with $1.17 billion as of Mar 29, 2015. Total debt increased to $7.1 billion from $5.9 billion as of Mar 29, 2015.

In the first quarter of 2016, Harley-Davidson’s operating cash flow declined significantly to $41.1 million from $174.7 million in the first quarter of 2015. Capital expenditures increased to $39 million from $38.1 million a year ago.

Share Repurchases

Harley-Davidson spent $144.6 million to repurchase 3.4 million shares in the reported quarter. As of Mar 31, 2016, Harley-Davidson had remaining authorization to buy back nearly 25.6 million shares.

Looking Forward

In the second quarter of 2016, Harley-Davidson expects to ship 82,500–87,500 motorcycles, compared with 85,172 motorcycles shipped in the year-ago period.

Harley-Davidson reaffirmed its guidance for motorcycle shipments in 2016 at 269,000–274,000 units, up 1%–3% year over year. The company also reiterated its guidance for operating margin from the Motorcycle segment in the range of 16%–17%. It expects capital expenditures of $255–$275 million this year.

In 2016, Harley-Davidson intends to increase marketing expenses by 65% and product development expenses by 35% year over year, to boost demand. This should lead to additional investment of nearly $70 million.

Zacks Rank

Currently, Harley-Davidson carries a Zacks Rank #3 (Hold). Some better-ranked automobile stocks include Federal-Mogul Holdings Corporation FDML, Cooper Tire & Rubber Co. CTB and Superior Industries International, Inc. SUP. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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SUPERIOR INDS (SUP): Free Stock Analysis Report
 
FEDERAL MOGUL-A (FDML): Free Stock Analysis Report
 
HARLEY-DAVIDSON (HOG): Free Stock Analysis Report
 
COOPER TIRE (CTB): Free Stock Analysis Report
 
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