Harley-Davidson Inc. (NYSE: HOG): Q1 Earnings Preview 2011

Harley-Davidson, Inc. (NYSE: HOG), the largest U.S. motorcycle maker,  is scheduled to release first-quarter earnings before the opening bell on Tuesday, April 19, 2011. Analysts, on average, expect the company to report earnings of 53 cents per share on revenue of $1.05 billion. In the year-ago period, the company posted earnings of 29 cents per share on revenue of $1.04 billion.

Harley-Davidson, Inc. produces and sells heavyweight motorcycles, as well as offers motorcycle parts, accessories, and related services. The Motorcycles segment designs, manufactures and sells at wholesale primarily heavyweight (engine displacement of 651+cubic centimeters (cc)) touring, custom and performance motorcycles, as well as a line of motorcycle parts, accessories, general merchandise and related services. Furthermore, the company maintains an extremely strong franchise.

Harleys continue to be largely recreational luxury vehicles not typically used as a primary method of transport.Harley's past growth and continued success is closely tied to its customers brand loyalty The vast majority of customers are essentially middle-aged, middle to upper class males. The average age of a Harley owner is 47 years. The major problem for Harley is that these older riders are not being replaced by a fresh batch of younger riders. The recession was exceptionally hard on makers of recreational vehicles like motorcycles and RVs. Not surprisingly, a big drop off in consumer spending led directly to massive revenue drops for recreational vehicle makers. Plants were closed and thousands of jobs were cut within the industry. However, the industry as a whole has taken recovery steps and has been aided by a return in consumer spending.

Several motorcycle manufacturers such as iconic Harley-Davidson Inc. have shifted some of their production facilities outside of the US to places like India, China and Brazil. These moves have had a two-fold benefit for motorcycle companies. They are able to lower manufacturing and labor costs, and it has facilitated establishing a retail market in those emerging markets. 

Harley is deep into its restructuring and already has taken out millions of dollars in costs.  The company has cut expenses by renegotiating labor contracts at factories in Pennsylvania and Wisconsin and introduced bikes to appeal to new riders. The company has also benefited from improving consumer confidence and renewed interest in big-ticket items like motorcycles. It  has been gaining market share in Europe and in the U.S. over the last few years. arley-Davidson will get a further boost as dealers start to restock and carry larger inventories. 

In the preceding fourth quarter, the Milwaukee, Wisconsin-based company's loss was $46.77 million or 20 cents per share, compared with a loss of $218.70 million or $0.94 per share in the previous-year quarter. Excluding the one-time charge of $85.2 million that the company’s incurred on early repurchase of senior unsecured notes, the company recorded a profit of $43.1 million or 18 cents per share during the quarter. Revenue rose to $917.08 million from $764.50 million in the year-ago period. Analysts, on average, expected the company to report earnings of 30 cents per share on revenue of $863.03 million. 

At its last earnings call in Jnuary, the company said that it expects to ship 51,000 to 56,000 motorcycles in the first quarter. In fiscal year 2011, the company expects to ship 221,000 to 228,000 Harley-Davidson motorcycles to dealers and distributors worldwide, representing an increase of 5 percent to 8 percent compared to 2010. The company expects to ship more motorcycles to U.S. dealers than it anticipates dealers will sell at retail in 2011, to return aggregate U.S. dealer inventory to what the company believes is an appropriate level. Harley expects 2011 gross margin to be between 34% and 35% for the full year.

The company also lowered the cost estimate for previously announced restructuring activities that began in 2009 by $10 million to $25 million. The company now expects previously announced restructuring activities to result in total one-time charges of $495 million to $510 million into 2012, including charges of $85 million-$95 million in 2011. Upon completion of the restructuring activities, Harley-Davidson continues to expect to realize annual ongoing savings of $290 million to $310 million, beginning in 2013. In 2010, the company incurred restructuring charges of $164 million and realized savings of $172 million.

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 14.48 and PEG ratio (5 yr expected) of 1.93.  In terms of stock performance, Harley shares have gained nearly 24 percent since the beginning of the year.

Full Disclosure: None.

Harley-Davidson Inc. (NYSE: HOG): Q4 Earnings Preview 2010

Harley-Davidson, Inc. (NYSE: HOG), the largest U.S. motorcycle maker,  is scheduled to release fourth-quarter earnings before the market open on Tuesday, January 25, 2011. Analysts, on average, expect the company to post a loss of 30 cents per share on revenue of $863.03 million. In the year-ago period, the company posted a loss of 63 cents per share on revenue of $764.50 million.

Harley-Davidson, Inc. produces and sells heavyweight motorcycles, as well as offers motorcycle parts, accessories, and related services. The Motorcycles segment designs, manufactures and sells at wholesale primarily heavyweight (engine displacement of 651+cubic centimeters (cc)) touring, custom and performance motorcycles, as well as a line of motorcycle parts, accessories, general merchandise and related services. Furthermore, the company maintains an extremely strong franchise.

Harleys continue to be largely recreational luxury vehicles not typically used as a primary method of transport.Harley's past growth and continued success is closely tied to its customers brand loyalty The vast majority of customers are essentially middle-aged, middle to upper class males. The average age of a Harley owner is 47 years. The major problem for Harley is that these older riders are not being replaced by a fresh batch of younger riders. The recession was exceptionally hard on makers of recreational vehicles like motorcycles and RVs. Not surprisingly, a big drop off in consumer spending led directly to massive revenue drops for recreational vehicle makers. Plants were closed and thousands of jobs were cut within the industry. However, the industry as a whole has taken recovery steps and has been aided by a return, albeit not a complete one, in consumer spending.

Several motorcycle manufacturers such as iconic Harley-Davidson Inc. have shifted some of their production facilities outside of the US to places like India, China and Brazil. These moves have had a two-fold benefit for motorcycle companies. They are able to lower manufacturing and labor costs, and it has facilitated establishing a retail market in those emerging markets. 

In the preceding third quarter, the Milwaukee, Wisconsin-based company's net income was $88.8 million, or 38 cents a share, from $26.5 million, or 11 cents a share, in the comparable quarter last year. Earnings from continuing operations was $93.7 million, or 40 cents a share. Revenue slipped to $1.09 billion from $1.11 billion. Analysts, on average, expected the company to report earnings of 36 cents per share on revenue of $1.10 billion. 

At its last earnings call in October, the company narrowed its forecast for 2010 shipments to between 207,000 and 212,000 Harley motorcycles, which would reflect a dip of about 5% to 7% from 2009. Harley previously forecast sales of 201,000 to 212,000 motorcycles.

Harley is deep into its restructuring and already has taken out millions of dollars in costs. The company has also benefited from improving consumer confidence and renewed interest in big-ticket items like motorcycles.

Among other developments, the company bought back senior unsecured notes with a face value of $297 million that were scheduled to mature Feb. 1, 2014. The purchase will lower fourth-quarter pretax profit by about $82.7 million, Harley said in a statement. Harley said it repurchased the notes for $380.8 million from Davis Selected Advisers LP using cash on hand. Had the company held the notes until they matured, it would have cost $438 million more in principal and interest.

In terms of stock performance, Harley shares have gained nearly 28 percent since the beginning of the year.

Full Disclosure: None.

Harley-Davidson Inc. (NYSE: HOG): Q1 Earnings Preview 2010

Harley-Davidson is scheduled to release its Q12010 earnings before the opening bell on Tuesday, April 20, 2010. Analysts, on average, expect the company to report earnings of $0.24 per share in the first quarter with estimates ranging from a low of $0.03 per share to a high of $0.39 per share. Revenues for the quarter are estimated to be $1.02 billion. In Q12009, the company reported earnings of $0.50 per share on revenue of $1.29 billion.

Harley-Davidson, Inc., through its subsidiaries, produces heavyweight motorcycles, as well as offers motorcycle parts, accessories, and related services. It operates in two segments, Motorcycles and Related Products, and Financial Services.

Harleys continue to be largely recreational luxury vehicles not typically used as a primary method of transport. The vast majority of customers are essentially middle-aged, middle to upper class males. The average age of a Harley owner is 47 years. The major problem for Harley is that these older riders are not being replaced by a fresh batch of younger riders.

The company suffered a steep drop in motorcycles sales due to a severe recession characterized by contracting credit market and uncertain job market. The company's expensive motorcycles have failed to attract buyers amid weak spending environment. Additionally, the second hand motorcycle market is flooded with Harleys as cash strapped Harley owners look to unload their bikes for cash.Harley-Davidson's finance unit, better known as Harley Davidson Financial Services or HDFS was greatly affected by the credit crunch as the secondary market for Harley loans vanished.The finance arm's performance has also been affected by heightened competition. Moreover, long term debt has more than quadrupled in the last three years amid ongoing restructuring plan.

In the preceding Q42009, the Milwaukee, Wisconsin-based company reported that it swung to a net loss of $218.70 million or $0.94 per share, compared with a profit of $77.81 million, or $0.34 per share, in the prior-year period. Revenue slumped 40.2% to $764.50 million from $1.28 billion in the fourth quarter of fiscal year 2008. Analysts, on average, expected the company to report a loss of $0.32 per share on revenue of $764.39 million for the quarter.

The company expects to ship 201 thousand to 212 thousand Harley-Davidson motorcycles in 2010 to dealers and distributors worldwide, which is a reduction of 5% to 10% from 2009. In the first quarter of 2010, Harley-Davidson expects to ship 52 thousand to 57 thousand motorcycles, down 24% to 30% from the first quarter a year ago.

For the full year, Harley-Davidson estimates gross margin to be in a range of 32.0% to 33.5%, and capital expenditures to be between $235 million and $255 million, including $95 million to $110 million to support restructuring activities. The company expects that 2010 will continue to be a challenging year.

Harley-Davidson anticipates previously announced restructuring activities that began in 2009 to result in total one-time charges of $430 million to $460 million into 2012, including charges of $175 million to $195 million in 2010. The company also added that it continues to expect annual ongoing total savings from restructuring of nearly $240 million to $260 million upon completion of all announced restructuring activities, including savings of about $135 million to $155 million expected in 2010.

Investors are expected to pay attention to the performance of Harley Davidson Financial Services unit, which has been a major source of losses since the downturn began.

Harley's shares surged recently on speculation that the company could be a target of a leveraged buyout. The stocks of the company also got a boost after RBC Capital Markets analyst Edward Aaron raised his price target for the motorcycle maker's shares and said that the first-quarter results could reverse a recent trend of earnings disappointment.

In terms of stock performance, Harley shares have gained nearly 28 percent since the beginning of the year.

Full Disclosure: None.

Harley-Davidson Inc. (NYSE: HOG): Q4 Earnings Preview 2009

Harley-Davidson Inc. (NYSE: HOG) is scheduled to release its fourth quarter earnings for 2009 before the market open on Friday, January 22, 2010. Analysts, on average, expect the company to report a loss of 29 cents per share on revenue of $766.14 million. In the year ago period, the company reported earnings of 34 cents per share on revenue of $1.29 billion.

Harley-Davidson, Inc., through its subsidiaries, produces heavyweight motorcycles, as well as offers motorcycle parts, accessories, and related services. It operates in two segments, Motorcycles and Related Products, and Financial Services.

Harleys continue to be largely recreational luxury vehicles not typically used as a primary method of transport. The vast majority of customers are essentially middle-aged, middle to upper class males. The average age of a Harley owner is 47 years. The major problem for Harley is that these older riders are not being replaced by a fresh batch of younger riders.

Harley Davidson suffered a steep drop in motorcycles sales last year due to a severe recession characterized by contracting credit market and uncertain job market. The company's expensive motorcycles have failed to attract buyers amid weak spending environment. Additionally, the second hand motorcycle market is flooded with Harleys as cash strapped Harley owners look to unload their bikes for cash.Harley-Davidson's finance unit, better known as Harley Davidson Financial Services or HDFS was greatly affected by the credit crunch as the secondary market for Harley loans vanished.The finnce arm's performance has also been affected by heightened competition. HDFS retail market share of new Harley-Davidson motorcycles sold in the US was 51.2% in the third quarter of 2009 compared to 57.6% in the third quarter of 2008.

In October, the Milwaukee, Wisconsin-based company reported that its third-quarter net income plunged 84.1% to $26.5 million, from the previous year's $166.5 million. On a per share basis, earnings plummeted 84.5% to $0.11 from $0.71 earned in the year-ago quarter. Analysts, on average, expected the company to post earnings of $0.21 per share on revenue of $1.10 billion for the quarter.

The company said in October that it would discontinue its Buell product line and divest its MV Agusta nit, as part of its go-forward business strategy designed to strengthen Harley-Davidson for long-term growth and deliver results through increased focus. However, the decision of the company was criticized by many as the move will potentially remove an entry point into the Harley family for the youngsters. The company also said that it would continue to expand its initiatives to enhance profitability through continuous improvement in manufacturing, product development and business operations.On a combined basis, Harley-Davidson expects its restructuring activities, together with the discontinuation of Buell operations, to result in one-time charges of $215 million - $245 million over 2009 and 2010, or an increase of $55 million from the estimate provided July 16, 2009. The company estimates annual ongoing savings from restructuring of about $140 million to $150 million.

The company also narrowed its fiscal 2009 guidance for shipments, and now expects to ship 222,000 to 227,000 Harley-Davidson motorcycles to dealers, including 35,000 to 40,000 during the fourth quarter. The company continues to expect full-year gross margins to be between 30.5% and 31.5%.

Last month, the motorcycle manufacturer issued a recall on its 2009 & 2010 touring line made between June 6, 2008, and Nov. 19, 2009, which consists of 111,569 motorcycles in total. The recall was due to concerns over the fuel tank mounts on these motorcycles, which might distort in a collision, possibly leaking fuel, and thus causing a fire.

Harley-Davidson recently announced that it plans to introduce 12 models to the Indian market in 2010. Agreed, India is the world's largest market for motorcycles behind China- but it is doubtful that they will be extremely profitable. The average price of the motorcycles sold in India is in the $1000 to $1500 range. The country slapped over 100% tariff on HOG. The cheapest bike they will sell there will be a normally about $7000 bike, which will retail for over $14000 due to the tariff. It's hard to imagine many Indians wanting to pay this kind of premium price.

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 20.22 and PEG ratio (5 yr expected) of 5.45. In terms of stock performance, Harley-Davidson shares have gained nearly 90% over the past year.

Full Disclosure: None.