On Dec 2, we reiterated the Neutral recommendation on Harley-Davidson, Inc. (HOG). Although the company has various positive drivers, we are concerned about its aging customer base, expensive products and strong competition.
Why the Reiteration?
Harley-Davidson posted a 23.7% year-over-year rise in earnings to 73 cents per share in the third quarter of 2013 from 59 cents a share. Earnings topped the Zacks Consensus Estimate by a cent.
The company reported positive earnings surprise in the last four quarters with an average beat of 2.29%. However, 10 out of 14 analysts covering the stock reduced their 2013 earnings estimate over the last 60 days, while 3 of them revised upwards. As a result, the Zacks Consensus Estimate for Harley-Davidson’s 2013 earnings per share inched down 0.3% to $3.27, up 20.04% year over year.
Harley-Davidson commands roughly 56.5% of the U.S. heavyweight motorcycles market, providing scale advantages over most competitors. Moreover, the company’s motorcycle shipments are increasing over time, while the restructuring initiatives are improving savings.
However, Harley-Davidson has an aging customer base. The company has not been able to attract younger generations, who are driven toward smaller and cheaper bikes. Also, the company has an expensive product range, which attracts only premium consumers. Moreover, its close competitors have more diverse product lines and are greater in size than Harley-Davidson, which operates in a niche market.
Other Stocks to Consider
Harley-Davidson currently carries a Zacks Rank #3 (Hold). Some better-ranked automobile stocks worth considering are Ford Motor Co. (F), Daimler AG (DDAIF) and Honda Motor Co., Ltd. (HMC). While Ford is a Zacks Rank #1 (Strong Buy) stock, Daimler and Honda hold a Zacks Rank #2 (Buy).
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