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Harley-Davidson, Inc. Q1 Earnings Preview: Seeing Mixed Results

 April 23, 2013 03:48 PM

(By Mani) Motorcycle company Harley-Davidson, Inc. (NYSE: HOG) is set to report its first-quarter results on April 25 amid a nice rebound in sales.

The January to March period is the first quarter post-restructure in which Harley-Davidson will flex its "surge" capability, raising production and shipments to dealers steeply at the start of riding season.

Wall Street sees earnings of 99 cents a share, according to analysts polled by Thomson Reuters. The consensus view implies a 33.80 percent increase from last year‘s 74 cents a share.

Harley-Davidson's earnings have surpassed Street view in three out of the past four quarters. In the last 90 days, the consensus estimate has gone up by 10 cents.

[Related -Jobs Growth Tepid At Best]

Quarterly sales are projected to rise 14.7 percent to $1.46 billion from $1.27 billion in the same period last year. However, the company's sales could bear the brunt of tough weather comparisons in March. Last year, the company benefited from early spring weather.

"We have previously noted that Q1 retail sales overall could likely be worse than the decline of 4-5% in Jan-Feb period. We believe March was a tougher comp last year than Jan-Feb, so full Q1 sales could likely be more negative than Jan-Feb decline," UBS analyst Robin Farley wrote in a note to clients.

However, April sales seem to be improving. The anticipation of retail sales acceleration beginning in April, which marks the start of a five month period of easy comparisons, should bode well for the stock.

[Related -Harley-Davidson, Inc. (HOG): Replacement Cycle, Strong Demand Bodes Well For Topline]

On its part, the company is growing sales through innovation and quality products and has been successful in attracting new riders and broadening its customer base. Benefits from restructuring and operating expense savings should allow these top-line gains to fall to the bottom line at a faster rate.

Investors should watch the motorcycle shipments for the quarter and the annual shipment guidance. The company expects to ship 71 thousand to 76 thousand motorcycles in the first quarter, an approximate increase of 10 percent to 18 percent, and 259 thousand to 264 thousand motorcycles in the year 2013, representing an increase of 4.5 percent to 6.5 percent from last year.

Further, the inventory mix should be watched as the company implements flexible production at its York plant in 2013.

For the fourth-quarter, net income declined to $70.64 million or 31 cents a share from last year's $105.68 million or 46 cents a share. Consolidated revenue dropped to $1.17 billion from $1.18 billion in the year ago quarter.

Retail sales of new Harley-Davidson motorcycles grew 7.5 percent, with unit sales up 8.4 percent in the U.S. and up 6.3 percent in international markets. The company shipped 47,067 motorcycles, lower than last year's 50,730 motorcycles.

Since reporting its fourth-quarter results, HOG shares have dropped 5.5 percent while gaining 3 percent year-to-date. HOG stock, which has been trading between $37.84 and $55.51 during the past 52-weeks, trade 15.4 times its 2013 consensus view and 13.29 times its 2014 Street estimate.

Wall Street, in general, has a bullish opinion on the stock, with 13 out 17 analysts covering HOG rating it as "strong buy" or "buy." The remaining four analysts recommend "hold," while there were no "sell" ratings on the stock.



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