Harley Davidson 3rd Quarter Earnings Report

Harley-Davidson (HOG) announced earnings for third quarter that fell from last year.

The company said its profit totaled $114.07 million, or $0.64 per share. This was down from $140.35 million, or $0.69 per share, in last year’s third quarter. Analysts had expected the company to earn $0.64 per share, according figures compiled by Thomson Reuters.

Harley-Davidson 3rd Quarter Earnings At A Glance:

-Earnings (Q3): $114.07 Mln. vs. $140.35 Mln. last year.
-Earnings Decline (Y-o-Y): -18.7%
-EPS (Q3): $0.64 vs. $0.69 last year.
-EPS Decline (Y-o-Y): -7.2%
-Analysts Estimate: $0.64
-Revenue (Q3): $1.27 Bln vs. $1.32 Bln last year.
-Revenue Change (Y-o-Y): -3.8%

Harley-Davidson worldwide retail motorcycle sales in the third quarter were down 4.5%, primarily on weak U.S. industry trends. Harley-Davidson retail motorcycle sales in the U.S. were down 7.1% compared to the year-ago quarter, with the overall U.S. industry also down for the same period. Harley-Davidson’s U.S. market share for the quarter was 52.3% in the 601cc-plus segment, essentially flat compared to the third quarter in 2015. Harley-Davidson international retail sales increased by 1.0 percent over the prior year quarter.

Recognizing the continued slower industry growth in the U.S., the company will streamline its operations in the fourth quarter of 2016. It expects to incur expenses of approximately $20 million to $25 million in the fourth quarter, primarily for employee separation and reorganization costs.

Harley-Davidson continues to expect to ship 264,000 to 269,000 motorcycles in 2016, which is approximately down 1% from 2015. In the fourth quarter of 2016, the company expects to ship 44,200 to 49,200 motorcycles compared to 48,149 motorcycles shipped in the year-ago period. The company continues to expect full-year 2016 operating margin of approximately 15 to 16% for the Motorcycles segment. The company continues to expect 2016 capital expenditures for Harley-Davidson, Inc. of $255 million to $275 million.

My Take

There is a lot of doom and gloom circling Harley Davidson sales, orders, growth, aging rider base. HD is taking the measures of laying off personnel, lowering expectations, and reorganizing to reduce costs.

So what does that really mean? It means the overall economy is in the tank. People are once again curtailing luxury purchases effecting sales in the power sports market.

Another factor in all of this is the current election. Election cycles tend to hit the economy due to uncertainty. Whose policies will take over, what will trade agreements do to the dollar, and export costs? Domestic products always take the hardest hit, costs at home fluctuate and often the trade deficit widens hurting import costs.

Given all of these factors and HD aggressive maneuvering I expect a full recovery early next year. The one thing that could derail this is any trade agreement that lessens the dollar in favor of foreign currency.