Harley-Davidson To See Fall In Revenue For 3rd Consecutive Quarter?

by Trefis Team
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Harley-Davidson
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Harley-Davidson (NYSE: HOG) is set to announce its Q2 2019 results on July 23, 2019, followed by a conference call with analysts. The Market expects the company to report revenue close to $1.4 billion in Q2 2019, which would be an decrease of nearly 5.5% y-o-y. The decrease is mainly expected due to the global auto market slowdown and the shrinkage of the heavy motorcycle market in the US.  Market expectation is for the company to report earnings of $1.21 per share in Q2 2019, lower than $1.52 per share in the year-ago period.

Harley-Davidson reported $5.7 billion in Total Revenues in 2018. This included 2 main revenue streams:

  • Motorcycle Business: $4.9 billion in 2018 (86.9% of Total Revenues). This includes the revenue earned by the company from its motorcycle and related products sales.
  • Financial Business: $0.7 billion in 2018 (13.1% of Total Revenues). This includes revenue from the financial services provided for purchasing or leasing vehicles of the company.

We have summarized our key expectations from the earnings announcement in our interactive dashboard –Harley-Davidson’s Earnings: Performance and 2019 Forecast. In addition, here is more Consumer Discretionary data.

 

Key Factors Affecting Earnings:

Revenue expected to continue to fall:

  • Harley-Davidson’s revenue has been fluctuating over the past few quarters.
  • The high fluctuation is primarily due to the shrinkage of the US Heavyweight motorcycle market which is still the main source of revenue for the company. In Q1 2019 the revenue increased by more than 20% quarter on quarter as the US market share went up and Thailand manufacturing strategy accelerated retail sales growth in ASEAN emerging markets.
  • The Heavyweight Motorcycle sales account for more than 60% of the company’s overall motorcycle sales. As a consequence of a decline in that market, the company is seeing a fall in motorcycle revenue. In 2019 we expect it to fall further to around $4.8 billion.
  • Financial Services has seen a moderate rise over the years as the Financing Assets have risen considerably. In 2019 we expect the revenue to remain nearly flat at around $740 million.

Trend in Expenses:

  • As Cost of Sales (both divisions) form nearly 70% of Total Expenses the fluctuation of the same is similar to Total Revenue.
  • In Q1 2019 the Total Expenses were impacted by lower shipments, unfavorable mix, and incremental tariffs, partially offset by lower year-over-year SG&A, and lower restructuring charges.

Full Year Outlook:

  • For the full year, we expect gross revenue to decrease by 2.9 % to $5.5 billion, primarily due to a challenging global auto market and shrinkage of the US Heavyweight motorcycle market.
  • Gross margin is expected to decrease further to around 36.8%.

 

Trefis has an estimate of $39 for Harley-Davidson’s stock. The slowdown in the global market and shrinking of its primary market has brought the company to a crossroads, as they now focus on new segments and geographies to take the growth forward.

 

 

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