Harley-Davidson Inc. (HOG) posted a 22.2% year-over-year rise in earnings to $1.21 per share in the first quarter of 2014 from 99 cents in the year-ago quarter. Earnings topped the Zacks Consensus Estimate of $1.08.
The year-over-year increase was due to improved motorcycle shipments and enhanced operating efficiencies. Net income increased 18.7% to $265.9 million from $224.1 million a year ago.
Consolidated revenues improved 10.2% to $1.73 billion, surpassing the Zacks Consensus Estimate of $1.52 billion. Operating income rose 18% to $410.9 million from $348.3 million in the first quarter of 2013.
Motorcycles and Related Products
Revenues from Motorcycles and Related Products improved 11.1% year over year to $1.57 billion in first-quarter 2014. Revenues from Harley-Davidson motorcycles increased 13.1% from the last-year comparable figure to $1.31 billion.
Operating income from Motorcycles and Related Products rose 25.6% to $347.7 million from $276.8 million a year ago. The year-over-year improvement was driven by increased motorcycle shipments and gross margins from the first quarter of 2013.
Harley-Davidson shipped 80,682 motorcycles to dealers and distributors worldwide during the quarter. Shipments in the quarter improved 7.3% from 75,222 motorcycles in the first quarter of 2013.
Harley-Davidson’s worldwide dealer retail sales of new motorcycles scaled up 5.8% to 57,415 units. In the U.S., sales improved 3% from the year-ago quarter to 35,730 units.
In international markets, sales went up 10.9% to 21,685 motorcycles. Sales rose 20.5% in the Asia-Pacific region, 8.2% in the Europe, Middle East, and Africa (EMEA) region and 8.9% in the Latin American region but declined 2.4% in Canada.
Revenues from Parts and Accessories increased 7.7% to $198.1 million, while revenues from General Merchandise – which includes MotorClothes apparel and accessories – fell 11.1% to $64.1 million.
Harley-Davidson Financial Services (HDFS)
Revenues in the Financial Services segment declined 1.7% to $154.4 million in first-quarter 2014. Operating income decreased 11.7% to $63.2 million from $71.5 million in the prior-year quarter. Operating income was affected by higher provision for credit losses.
Financial Position
Harley-Davidson had cash and cash equivalents of $935.8 million as of Mar 31, 2014, down from $1.02 billion as of Mar 31, 2013. Total debt decreased to $5.09 billion from $5.3 billion as of Mar 31, 2013.
In the first quarter of 2014, Harley-Davidson’s operating cash flow improved to $203.6 million from a cash outflow of $108.5 million in the prior-year quarter. Capital expenditures increased to $25.9 million from $22.3 million in the first quarter of 2013.
Share Buyback
Harley-Davidson spent $76.6 million to repurchase 1.2 million shares in first-quarter 2014. The company had remaining authorization to buyback 28.1 million shares at the end of the quarter.
Looking Forward
For 2014, Harley-Davidson reaffirmed its shipment guidance of 279,000–284,000 motorcycles to dealers and distributors worldwide, up 7–9% over 2013. The company expects operating margin between 17.5% to 18.5% in the Motorcycles segment and capital expenditures between $215 million to $235 million for full-year 2014.
In the second quarter of 2014, Harley-Davidson expects shipments to range between 92,000–97,000 motorcycles.
Currently, Harley-Davidson holds a Zacks Rank #4 (Sell). Some better-ranked automobile stocks worth considering are PACCAR Inc. (PCAR), Fox Factory Holding Corp. (FOXF) and Toyota Motor Corporation (TM). Toyota carries a Zacks Rank #1 (Strong Buy), while PACCAR and Fox Factory carry a Zacks Rank #2 (Buy).
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