Will Harley-Davidson (HOG) Disappoint This Earnings Season?

Harley-Davidson, Inc. HOG is set to report second-quarter 2014 results on Jul 22. Last quarter, it posted a +12.04% surprise. Let us see how things are shaping up for this announcement.

Factors Affecting the Past Quarter

Harley-Davidson is expanding its product portfolio to increase its customer base. In Mar 2014, the company launched two bikes – the Low Rider and the SuperLow 1200T. Harley-Davidson is also developing its first electric motorcycle, Project LiveWire. As a result, its motorcycle shipments are increasing over time. The restructuring activities completed last year are also generating cost saving, while efficient capital deployment is boosting shareholders' value.

However, Harley-Davidson is facing trouble attracting the younger generation, which is more inclined toward smaller and cheaper bikes. The problem is compounded by an expensive product range, which attracts only premium consumers. Moreover, Harley-Davidson Financial Services has been suffering from a decrease in revenues and operating income, due to higher credit losses and contracting net interest margins.

Earnings Whispers?

Our proven model does not conclusively show that Harley-Davidson is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Harley-Davidson has a negative ESP. That is because the Most Accurate estimate stands at $1.45 while the Zacks Consensus Estimate is $1.46. Hence, there is a difference of -0.69%.

Zacks Rank: Harley-Davidson's Zacks Rank #4 (Sell) lowers the predictive power of ESP. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum, as is the case with Harley-Davidson. Three of the nine analysts covering the stock revised their estimates downward in the last 30 days.

Other Stocks to Consider

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

Gentex Corp. GNTX has Earnings ESP of +2.08% and a Zacks Rank #1 (Strong Buy). Gentex will report second-quarter 2014 earnings on Jul 24, 2014.

Meritor, Inc. MTOR has Earnings ESP of +6.67% and a Zacks Rank #1. It will release second-quarter earnings results on Jul 31, 2014.

Dana Holding Corporation (DAN) has Earnings ESP of +5.77% and a Zacks Rank #2 (Buy). The company will post second-quarter earnings on Jul 24, 2014.