Harley Davidson (NYSE:HOG) will release earnings for the first quarter on April 25th. We are bullish on the company’s ongoing turnaround. According to data by Motorcycle Industry Council, the company has recorded the best growth in the last quarter since the third quarter of 2003. Retail sales of the company were up by 26% against the expected estimates of 17%.We look for continued strong results in this earnings report.
Harley Davidson competes with other major motorcycle manufacturers like Honda Motor Company (NYSE:HMC), Kawasaki Heavy Industries (PINK:KWHIY) and Yamaha Motors (TYO:7272). We currently have a Trefis price estimate of $59 for Harley Davidson, which is about 14% above the current market price.
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U.S. sales strong
Harley Davidson sales have been helped by the revived consumer spending in U.S. and the warmer than usual weather. We expect stronger retail sales to support continued growth, and the company’s shipments will also keep up with this growth in retail sales as dealer inventories are at historic lows.
U.S. Motorcycles is the most important division of Harley Davidson accounting for nearly 32% of the stock’s value. According to our estimates, Harley Davidson’s U.S. market share should reach 58% by the end of the Trefis forecast period.
Sales in international markets
Harley Davidson is rapidly expanding in international markets. The company has seen strong demand in India and China for its bikes, and it is working diligently to capitalize on this by providing superior customer experience, better dealer networks and customized products. The company recorded high sales growth in Latin America and Mexico in the last quarter of 2011 and is expected to have carried the momentum in the last quarter. It will also be interesting to see as to how Harley’s efforts to revamp operations in Brazil by restarting business through 11 new dealers has fared.
The company has taken a variety of internal measures to improve its performance and margins. It has worked on shortening its delivery times and product development cycles.
Apart from that, Harley Davidson has launched a number of retail improvements focused at providing better experience and value to the customer. It is also proceeding along its restructuring plan through which it intends to save approximately 30-40% of its SG&A costs every year. We will be keenly watching if this has translated into better margins for the company.