Harley-Davidson Beats Low Q1 Expectations, But Analyst Says US Retail Environment Challenging

Harley-Davidson Inc HOG reported first-quarter results Tuesday that outpaced fairly low expectations and left its full-year shipment and margin guidance unchanged.

The substantial price difference between new and used bikes in the U.S. continues to adversely impact new sales, according to Raymond James. "We await a sustained industry recovery before getting more constructive,” an analyst at the firm said in a new report. 

The Analyst

Joseph Altobello maintained a Market Perform rating on Harley-Davidson.

The Thesis

The motorcycle manufacturer reported first-quarter adjusted EPS of 98 cents, representing a 21 percent year-on-year decrease, but beating the Street expectation of 82 cents. Motorcycle and related products revenue declined 12 percent to $1.196 billion, with bike ASPs falling almost 7 points, Altobello said in a Tuesday note. (See his track record here.) 

Global shipments, although down 8 percent, were higher than expected, with 58,900 units shipped versus the Raymond James estimate of 55,600 and Harley's guidance of 53-58,000. The beat came as the company shipped more Street motorcycles than anticipated due to the earlier receipt of replacement parts, the analyst said. 

Harley-Davidson’s U.S. retail sales declined 4.2 percent in the first quarter versus last quarter’s 10.1-percent decline. The company gained market share during the quarter to take 51.1 percent of the U.S. market, Altobello said. 

American sales continue to be depressed due to the large price gap between new and used bikes, and international trends remain soft, the analyst said. 

Harley-Davidson maintained its 2019 guidance at global shipments of 217-222,000 and an operating margin of 8-9 percent.

Raymond James raised its 2019 EPS estimate from $3.70 to $3.80 to reflect the quarterly beat. 

Price Action

Harley-Davidson shares were down 4.26 percent at $37.32 at the time of publication Wednesday. 

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