Here’s Why We Have Revised Our Price Estimate For Harley-Davidson To $45

by Trefis Team
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Harley-Davidson (NYSE:HOG) is going through challenging times as the U.S. motorcycle industry faces softness. In Q3 2017 the company reported a 10% year on year decline in revenues and a 40% year on year decline in EPS (earnings per share).  The weakness in the U.S. motorcycle industry is likely to continue in the short term and Harley-Davidson is managing the situation by reducing production and aggressive cost management. The company revised its shipment guidance for the year 2017 and now expects a 6-8% decline in shipments and a 1% decline in operating margins compared to the previous year.

Based on the above guidance we have adjusted our forecast numbers for the company leading to a revision in our price estimate to $45. Our revised forecast considers the following:

  • A 7% decline in worldwide shipments for 2017 compared to 2016. We expect a 4% decline in the subsequent year and expect the decline to be less than 1% thereafter.
  • A 1% decline in gross profit margin in 2017 and a 0.5% decline in 2018. Thereafter we expect these margins to remain stable over our forecast period.
  • We don’t expect any growth in average revenue per motorcycle in 2017 and 2018. Thereafter we expect this revenue to grow in the range of 0.5%-1%
  • We do not expect any significant growth in the revenues of the company’s parts and accessories and financial services business over our forecast period.

Click here to see our detailed analysis for Harley-Davidson.

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