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Harley-Davidson (HOG) Q1 Earnings: Stock to Disappoint?

Harley-Davidson, Inc. HOG is set to report first-quarter 2016 results on Apr 19. In the last quarter, it delivered a positive earnings surprise of 15.79%. Further, the company managed to beat earnings in three of the last four quarters with a positive average surprise of 2.57%. Let us see how things are shaping up for this announcement.

Factors Influencing this Quarter

Harley-Davidson is expanding its product portfolio to increase its customer base. The company’s large share in the U.S. motorcycle market, consistent capital deployment and expanding product portfolio are positives. Harley-Davidson expects shipments of 78,000–83,000 motorcycles for the first quarter of 2016, compared with 79,589 motorcycles shipped in the year-ago period.

However, Harley-Davidson expects stiff competition to hurt retail sales this year as competitors rely on discounting and product introduction to boost sales. Further, the company anticipates headwinds due to macroeconomic challenges in some regions. Harley-Davidson expects retail sales to decline in Brazil. The company also expects a small decline in operating income for the Financial Services segment this year due to increased borrowing costs and unfavorable credit losses, partially offset by higher revenues.

Earnings Whispers

Our proven model does not conclusively show that Harley-Davidson is likely to beat earnings this quarter. This is because a stock needs to have both a positivehttp://www.zacks.com/earnings/earnings-surprise-predictions/"> Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP for Harley-Davidson is currently pegged at -4.65%. This is because the Most Accurate estimate of $1.23 stands below the Zacks Consensus Estimate of $1.29.

Zacks Rank: Harley-Davidson currently has a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Ferrari N.V. RACE has an Earnings ESP of +12.5% and a Zacks Rank #3. The company will report first-quarter 2016 financial numbers on May 2.

American Axle & Manufacturing Holdings Inc. AXL has an Earnings ESP of +2.86% and a Zacks Rank #3. The company will report first-quarter 2016 financial numbers on May 6.

Tenneco Inc. TEN has an Earnings ESP of +1.80% and a Zacks Rank #3. The company is expected to report first-quarter 2016 results on Apr 26.

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AMER AXLE & MFG (AXL): Free Stock Analysis Report
 
TENNECO INC (TEN): Free Stock Analysis Report
 
HARLEY-DAVIDSON (HOG): Free Stock Analysis Report
 
FERRARI NV (RACE): Free Stock Analysis Report
 
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