Harley-Davidson's Q3 Earnings Fall on Lower Shipments
Harley-Davidson, Inc. (HOG) posted a 5.5% fall in earnings to 69 cents per share in the third quarter of 2014 from 73 cents in the year-ago quarter. Earnings, however, topped the Zacks Consensus Estimate of 60 cents per share.
The year-over-year decline was due to lower motorcycle shipments, as planned by the company. Net income declined to $150.1 million from $162.7 million a year ago.
Consolidated revenues fell 3% to $1.3 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.14 billion. Operating income deteriorated 10.9% to $224.1 million from $251.5 million in the third quarter of 2013.
Harley-Davidson, Inc - Earnings Surprise | FindTheBest
Motorcycles and Related Products
Revenues from Motorcycles and Related Products went down 4.2% year over year to $1.13 billion in third-quarter 2014. Revenues from Harley-Davidson motorcycles fell 4.9% from the last-year comparable figure to $815.4 million.
Operating income from Motorcycles and Related Products fell 16.6% to $146.3 million from $175.5 million a year ago. The year-over-year decline was due to lower motorcycle shipments, which resulted in a fall in revenues.
Harley-Davidson shipped 50,670 motorcycles to dealers and distributors worldwide during the quarter, in line with the company’s guidance. Shipments in the quarter declined 6.2% from 54,025 motorcycles in the third quarter of 2013.
Harley-Davidson’s worldwide dealer retail sales of new motorcycles went up 3.8% to 73,217 units. The launch of the model year 2015 motorcycles in August, as well as the availability of the new Street motorcycles in showrooms and the increased popularity of the Sportster motorcycles boosted sales. In the U.S., sales increased 3.4% from the year-ago quarter to 50,167 units.
In international markets, sales rose 4.8% to 23,050 motorcycles. Sales increased 12.8% in the Asia-Pacific region, 7% in the Latin America region and 1.7% in the Europe, Middle East, and Africa region but declined 5.8% in Canada.
Revenues from Parts and Accessories went down 4.2% to $239.7 million, while revenues from General Merchandise – which includes MotorClothes apparel and accessories – improved 4.8% to $69.3 million.
Harley-Davidson Financial Services
Revenues in the Financial Services segment improved 4.7% to $171 million in third-quarter 2014. Operating income went up 2.2% to $77.8 million from $76.1 million in the prior-year quarter. Operating income gained from higher net interest income, partly offset by higher provision for credit losses.
Financial Position
Harley-Davidson had cash and cash equivalents of $979.9 million as of Sep 28, 2014, down from $1 billion as of Sep 29, 2013. Total debt increased to $5.44 billion from $5.18 billion as of Sep 29, 2013.
In the first nine months of 2014, Harley-Davidson’s operating cash flow improved to $966.9 million from $825.1 million in the prior-year quarter. Capital expenditures increased to $120.3 million from $111.7 million in the first nine months of 2013.
Share Buyback
Harley-Davidson spent $169.6 million to repurchase 2.6 million shares in third-quarter 2014. The company had 24 million shares remaining under its repurchase program at the end of the quarter.
Looking Ahead
For 2014, Harley-Davidson reaffirmed its guidance for shipment to dealers and distributors worldwide to 270,000–275,000 motorcycles. This implies a 3.5–5.5% increase over 2013. The company expects operating margin between 17.5% and 18.5% in the Motorcycles segment and capital expenditures of $215–$235 million for full-year 2014.
Currently, Harley-Davidson holds a Zacks Rank #4 (Sell). Better-ranked automobile stocks worth considering include Tesla Motors, Inc. (TSLA), Gentherm Incorporated (THRM) and STRATTEC Security Corporation (STRT). Gentherm and STRATTEC sport a Zacks Rank #1 (Strong Buy), while Tesla carries a Zacks Rank #2 (Buy).
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