What To Expect From Harley-Davidson’s Q1 2018 Results

by Trefis Team
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Harley-Davidson (NYSE: HOG) will release its Q1 2017 results on 24th April and conduct a conference call with analysts the same day. The company is expected to post sluggish results with a consensus average adj-EPS estimate of $.90 per share and revenue estimate of $1.25 billion, 14% and 6% lower than a year ago reported figures. Harley-Davidson expects headwinds in the U.S. to continue to impact its top-line and is continuously focusing on improving its cost structure to maintain its margins in a tough environment. We have outlined our expectations for the company’s results in 2018 in our interactive dashboard.

Harley Davidson To Continue To Face Headwinds In The U.S.

Per the company’s latest guidance, Harley Davidson expects its total motorcycle shipments to range from 231,000 to 236,000 motorcycles in 2018, ~3% lower than 2017 total shipment volume (assuming mid-point). The company is expected to continue to face a decline in shipment volume as the motorcycle industry is likely to remain weak in 2018. Nearly 60% of Harley-Davidson’s motorcycle shipments are in the U.S. and according to RBC the motorcycle industry is expected to shrink by 5-7% in 2018 which would thus have a direct negative impact Harley Davidson’s sales volume. While the company is focusing on several international markets to drive growth, these regions are not likely to contribute materially towards its revenues until the next few years. Motorcycle sales in Q1  are expected to be rangebound between 60,000 to 65,000, compared to 70,831 sold in the same period last year, reflecting almost a 12% year-on-year (Y-o-Y) decline.

Margins Are Expected To Remain Low

Although the company has been continuously working towards its cost improvement initiatives to be better equipped to face tough market conditions, margins are expected to remain lower in 2018 in comparison to the previous year (excluding the impact of deferred tax asset write-down in 2017). The company is currently optimizing its manufacturing facilities – beginning by consolidating its plant in Kansas and closing its wheel operations in Australia. The resultant optimizing efforts are likely to increase the company’s manufacturing optimization and restructuring costs leading to an operating margin for 2018 to about 9.5% to 10.5% — 2-3%  lower than 2017. Additionally, increasing raw material costs with rising steel and aluminum prices are expected to further add to the company’s woes.

The company in 2018 continues to focus on growing its global ridership, new product momentum, and adding new high-impact models, along with increasing its reach in the international market. However, an unfavorable U.S. market would continue to weigh on the company’s results. You can change our estimates for our base case model by inputting your own expectations to arrive at your own fair price estimate for the company.


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