What Will Be The Impact On Harley’s Valuation If International Motorcycle Sales Increase By More Than Expected?
Harley-Davidson (NYSE:HOG) is heavily dependent on the domestic market, with two-thirds of its motorcycles shipped in the U.S. itself. However, with slowing activity in the home market, the company has looked to ramp up international growth to boost its financials. Markets outside the U.S. form approximately 30% of Harley’s top line, which remained flat through the first three quarters of 2016 (includes only motorcycles and related products revenue). While Harley’s retail sales declined 1.9% year-over-year through September, international sales were up 3.3% year-over-year. Retail sales grew 6.6% in EMEA region through Q3, and by 6.3% in Canada.
The company is focusing on higher international sales growth than U.S. growth. Harley added 9 international dealerships in Q3 to increase its reach and availability, after adding 11 in the first half of the year. Their aim is to add 150-200 international dealerships by 2020.
However, even if we consider international growth to come thick and fast, by more than we currently estimate, there will be only a 4% upside to our current price estimate for Harley-Davidson. Trefis currently estimates Europe’s heavyweight motorcycle market size (601+ cc) to grow at 3.4% CAGR, and its market share to grow from an estimated 10.6% in 2016 to 11% in 2021. On the other hand, we estimate the rest of the world motorcycle sales to grow at a CAGR of 5%.
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Although international sales are very important for Harley-Davidson, it can be seen that the domestic market is the most important division for the company, since a large fluctuation in international sales causes only a slight upside/downside on the company’s overall value.
Have more questions on Harley-Davidson? See the links below.
- Reliance On The Slow Domestic Market Is Weighing Down Harley-Davidson’s Performance
- Harley-Davidson Reports Q3 Results In Line With Estimates; Plans For Reorganization
- International Sales-Lift Could Offset Harley’s Anticipated Drop In Domestic Sales In Q3
- Harley-Davidson Earnings Review: Market Share Gain In The U.S. Overshadows Retail Sales Decline
- What’s Harley-Davidson’s Fundamental Value Based On Expected 2016 Results?
- What Is Harley-Davidson’s Revenue And Gross Profit Breakdown?
- By What Percentage Have Harley-Davidson’s Revenues And Gross Profit Grown Over The Last Five Years?
- How Has Harley-Davidson’s Revenue And Gross Profit Composition Changed Over 2012-2016E?
- Where Will Harley’s Revenue And Gross Profit Growth Come From Over The Next Three Years?
- What Will Be The Impact On Harley-Davidson’s Valuation If Motorcycle Sales In The US Decline?
- What Will Be The Impact On Harley-Davidson’s Valuation If Motorcycle Sales In The US Accelerate?
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