On Mar 4, 2015, we issued an updated research report on Harley-Davidson, Inc. HOG. The company reported positive earnings surprises in each of the trailing four quarters with an average beat of 11.02%.
Harley-Davidson reported strong operating results for 2014. Earnings per share grew 18.3% year over year. This is the fifth consecutive year in which the company’s earnings per share have grown in double digits. Moreover, revenues surpassed the $6 billion mark for the first time since 2006. Further, new retail motorcycle sales reached a record high in the Asia-Pacific, Europe, the Middle East and Africa, and Latin America.
Harley-Davidson commanded a 53.3% share of the U.S. motorcycle registrations in 2014. The huge market share provides scale advantages over most competitors. Moreover, the company is expanding its product portfolio to increase its customer base.
Harley-Davidson believes in a consistent dividend payment policy with hikes almost every year. Regular capital deployment helps boost shareholder value.
However, operating income of the company’s Financial Services segment decreased 1.9% year over year in 2014, primarily due to higher provision for credit losses. The company expects operating income from the segment to decline marginally in 2015 due to higher credit losses and contracting net interest margins as a result of rising competition and mounting borrowing costs. We are also concerned about the aging customer base and expensive product range.
In 2015, Harley-Davidson expects its shipments to increase 4%–6% to 282,000–287,000 motorcycles worldwide. Also, for 2015, Harley-Davidson expects operating margin from the Motorcycle segment to be 18%–19% and capital expenditures of $240–$260 million.
In first-quarter 2015, Harley-Davidson expects shipments to be in the range of 79,000–84,000 motorcycles.
Some peers in the auto industry that are currently performing well include Superior Industries International, Inc. SUP, Tata Motors Limited TTM and Wabash National Corp. WNC.
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