Harley-Davidson, Inc. (HOG) posted a 2.9% year-over-year rise in earnings to 35 cents per share in the fourth quarter of 2014 from 34 cents in the year-ago quarter. Also, earnings topped the Zacks Consensus Estimate of 33 cents.
The year-over-year increase came on the back of strong international sales of the new Harley-Davidson motorcycles and the company’s focus on expansion of its customer base. However, net income decreased 1.2% to $74.5 million from $75.4 million a year ago.
Consolidated revenues improved 1% to $1.2 billion, exceeding the Zacks Consensus Estimate of $1.06 billion. Operating income dropped 19.4% to $98.3 million from $122 million in the fourth quarter of 2013.
2014 Results
Harley-Davidson reported earnings of $3.88 per share for full-year 2014, up 18.3% from $3.28 per share in 2013. Earnings per share surpassed the Zacks Consensus Estimate of $3.86.
Net income for 2014 increased to $844.6 million from $734 million a year ago. Revenues increased 5.6% to $6.23 billion from $5.90 billion in 2013, exceeding the Zacks Consensus Estimate of $5.6 billion.
Motorcycles and Related Products
Revenues from Motorcycles and Related Products were flat at $1.03 billion in fourth-quarter 2014. Operating income from Motorcycles and Related Products decreased to $35.9 million from $60.7 million a year ago. The year-over-year decline was due to unfavorable currency translation.
Revenues from Harley-Davidson motorcycles inched up 0.4% to $784.5 million. Harley-Davidson shipped 47,157 motorcycles to dealers and distributors worldwide during the fourth quarter of 2014, compared with 46,618 motorcycles in fourth-quarter 2013.
Harley-Davidson’s worldwide dealer retail sales of new motorcycles scaled up 2.8% to 47,149 units, higher than 45,875 motorcycles sold in the year-ago quarter. However, sales in the U.S declined 1.6% to 26,957 new Harley-Davidson motorcycles.
Higher international sales offset the decline in the U.S. International sales increased 9.2% to 20,192 motorcycles from 18,488 motorcycles in the fourth quarter of 2013. International sales rose 14.2% in the Asia-Pacific region, 8.7% in the Europe, Middle East, and Africa (“EMEA”) region, and 4.7% in the Latin America region, partially offset by a 5.7% decrease in Canada.
Revenues from Parts and Accessories decreased 2.2% to $165.6 million, and revenues from General Merchandise – which includes MotorClothes apparel and accessories – fell to $75 million.
Harley-Davidson Financial Services (HDFS)
Revenues in the Financial Services segment increased 6.7% to $169 million in fourth-quarter 2014. Operating income increased 1.8% to $62.4 million from $61.3 million in the prior-year quarter. However, this was partially offset by higher provision for credit losses.
Financial Position
Harley-Davidson had cash and cash equivalents of $906.7 million as of Dec 31, 2014, compared with $1.1 billion as of Dec 31, 2013. Total debt increased to $4.5 billion from $4.1 billion as of Dec 31, 2013.
In 2014, Harley-Davidson’s operating cash flow improved to $1.2 billion from $977.1 million in the same period a year ago. Capital expenditures increased to $232.3 million from $208.3 million in 2013.
Share Repurchase
Harley-Davidson spent $604 million to repurchase 9.1 million shares in 2014. During the fourth quarter of 2014, the company repurchased 3.3 million shares for $222.1 million. At 2014-end, 20.9 million shares remained under the company’s share repurchase authorization.
Looking Forward
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.
Currently, Harley-Davidson carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks include Tesla Motors, Inc. (TSLA), PACCAR Inc. (PCAR) and Lithia Motors Inc. (LAD). All these stocks carry a Zacks Rank #2 (Buy).
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