Harley Reports First-Quarter Earnings. Beating Estimates On International Sales. US Retail Sales Slightly Down.

HD1logohdFirst-quarter net income declined to $250.49 million from last year’s $269.85 million. Earnings per share, however, increased 7.1 percent to $1.36 from $1.27 last year, owing to lower share count. On average, 19 analysts polled by Thomson Reuters expected earnings of $1.30 per share for the quarter. Consolidated revenue increased to $1.75 billion from $1.67 billion in last year’s first quarter.

logohdMotorcycles and related products revenues went up to $1.58 billion from prior year’s $1.51 billion. Analysts expect revenues of $1.50 billion. Harley-Davidson worldwide retail motorcycle sales in the first quarter were up 1.4 percent to 57,458, driven by a 4.5 percent increase in international markets. Retail motorcycle sales in the U.S. fell slightly by 0.5% as a result of increased competition. Latin America sales tumbled 26.5%, Harley-Davidson sold 57,458 motorcycles during the first quarter, including 35,326 in the U.S. Units grew 8.8% in Europe, the Middle East, and Africa.

logohdLooking ahead, Harley-Davidson expects to ship 82,500 to 87,500 motorcycles in the second quarter, compared to 85,172 motorcycles shipped in the year-ago period. The company continues to expect it will ship 269,000 to 274,000 motorcycles in 2016, an approximate 1 to 3 percent increase from 2015. “The increased marketing and new product investments are beginning to take hold and we anticipate continued progress across our focus areas as we dial in and ramp-up our approach,” said Chief Executive Matt Levatich.

Wall Street. Market Sentiment.

Today April 19, Harley-Davidson stock (HOG) closed down 2.49% for the day. The reasons may be the following.

Takeaway 1: Harley-Davidson is gaining traction in important foreign markets.

Sales crumbled 27% year over year, but that market is now its smallest, and the outcomes are likely influenced by the economic upheavals occurring in a number of markets. Moreover, the one country that had been driving sales in the region, Mexico, has undoubtedly been hit hard by the collapse in oil prices, so sales would naturally be hurt.

But more important for Harley-Davidson is the growth it experienced elsewhere in the world, particularly in the Europe, Middle East, and Africa region, its biggest foreign market, which enjoyed an 8.8% bump in sales, as well as the Asia-Pacific region, the second-largest international segment, which gained 6.6% in sales, its best quarter ever. Together, their sales are equivalent to about half of the U.S. market, and the near-8% average gain shows Harley-Davidson’s marketing efforts and new product introductions are resonating with bike buyers there.

Takeaway 2: Connecting with U.S. customers remains elusive.

While the half-percent drop in U.S. sales beat analyst expectations, it’s still yet another quarter of lower sales. Just because you’re not doing as bad as Wall Street thought you were going to do doesn’t mean you’ve done well.

The continuing loss of market share, which now hovers just above 50%, shows Harley-Davidson still retains extreme cachet with big-bike buyers, but it also means it’s likely to lose its grip on owning more than half the market very soon. There are simply too many comparable bikes for buyers to choose from, including from Polaris Industries, Honda, and others. Those manufacturers are also willing to discount their bikes in this unsettled economy to maintain or even gain share, something Harley remains loathe to do.

Takeaway 3: H-D may soon dilute its motorcycles.

The bike maker says it is going to “accelerate the cadence” of new product introductions, which means it will be flooding the market with lots of new models. Putting too many models on the showroom floor may give buyers more choice, but it may also dilute the impact and strength of any one model.

Harley-Davidson already offers a fairly broad selection of bikes and options at a variety of price points, and rather than make its “menu” even more complex, it may actually want to simplify things by focusing on its strongest offerings.

Takeaway 4: Earnings aren’t nearly as good as is being suggested.

Net income fell 7% year over year even though earnings per share jumped by a similar amount. The discrepancy comes from the fact that Harley-Davidson bought back 3.4 million shares during the quarter and has reduced its stock outstanding by 27.6 million shares from the year-ago period. On a comparable basis, Harley would’ve recorded earnings of just $1.18 per share.

The market’s not taking too kindly to Harley-Davidson’s results, sending the bike maker’s stock 2.4% lower today April 19th. While it may be prepping for the warmer weather in hopes of greater sales to come, the number of bikes the company is shipping to U.S. dealers still doesn’t seem warranted considering the lackluster acceptance they’ve already been given.

There remains a disconnect between the bike maker’s sales and shipments, and though it continues to expect it will ship between 269,000 and 274,000 motorcycles this year, up 1% to 3% from last year, that can only happen if sales pick up here at home. There’s no indication that’s happening, so we may ultimately see Harley-Davidson need to scale back those numbers once again.

19 Responses to “Harley Reports First-Quarter Earnings. Beating Estimates On International Sales. US Retail Sales Slightly Down.”

  1. 1 boston jim Apr 19th, 2016 at 12:06 pm

    H-D sales are down in the USA, up in Canada & Europe, I didn’t read anything about China. The 52 week spread was a low of $36. & a high of $61., with today at noon, down almost $2., to $45.50. Last quarter, H-D blamed it’s sales decline, on Auto – Trikes, etc., (Slingshots?), they didn’t come out & say Polaris! Or, that the Quality of their bikes had anything to do with it? The Twin Cam has been with us 18 model years, the same as the Panhead & Shovelhead! If you’re going to use chains to turn your cams, you might as well have OVERHEAD CAMS ! I read somewhere, that AMF, was doing a lot of R&D on a OHC motor, when they sold H-D back to Willie & the Boys, but, they didn’t have any money to continue R & D ! It was much easier to put NEW Rocker Boses on the 80″ Shovelhead ! Long Live the EVO, the motor that saved HARLEY ! Be Safe, Boston Jim

  2. 2 Dan Martinez Apr 19th, 2016 at 4:36 pm

    Boston Jim. Read the second page of the feature. Interesting. Sales continue to degrade in the US…

  3. 3 boston jim Apr 19th, 2016 at 7:11 pm

    Hey Dan, I have the stock market show on all day 5 days a week! When they said H-D was reporting today, I was waiting for it. We still have some stock, from when it sunk to $7.99 & sold for $65. per share.
    I can’t believe grown men have been buying this poorly designed & made motor for 18 years. I believe it’s the Biggest Sham H-D ever pulled on the loyal buyers ! There are families that have been buying H-D for 4 Generations, they were all Betrayed, by this motor, demanded by the EPA ! I think that’s all Bullshit, the Grandfather of the present day Sportster, the 52 KH, started with 4 Cams, still has 4 Cams, today, 64 years later. I never drink the Kool-Aid, when a New Product comes out. I did buy the last EVO FXSTC, & I am so Glad I did, I believe it’s desirable, in demand, valuable, compared to the 100 million Crappy Twin Cams out there, that aren’t worth shit. And the crappy 2004 & up Sportsters with NO trapdoor, what a piece of shit, The only good thing about this mess, there will be a lot of cheap starter Bikes for the next 2 Generations. I hope H-D wakes up, before it’s too late, like INDIAN, in 1953! BJ

  4. 4 garagedog Apr 19th, 2016 at 8:55 pm

    Walked through local h-d store today and it is so full of bikes – stuffed. I wonder, who is going to buy them all? I truly hope they all sell, we sure need the parts dept.

  5. 5 Matt W. Apr 19th, 2016 at 9:28 pm

    The H-D dealership near me has had to set up tents in the parking lot to handle the overflow of inventory. Wonder where they are going to ship all these new bikes?

  6. 6 Woody's Apr 20th, 2016 at 7:19 am

    How about the grown men who think a company’s stock price anything to do with the quality of its products or the expertise of the folks running it?

  7. 7 David King Apr 20th, 2016 at 8:04 am

    Woody, you are absolutely correct. There is often a disconnect. Not everything and everyone works toward the same goal.

  8. 8 JM Apr 20th, 2016 at 11:35 am

    Harley-Davidson has always had to tread a very fine line. “Made in America” versus using the best components available anywhere. Triumph builds Bonneville in Thailand – that’s how they are able to sell them at such a low price. Yet Harley builds bikes with some Indian made components (yet still assembled in Kansas City) and they get raked over the coals. Harley uses American-made Hayes brakes on some machines, (apparently) higher-quality Brembo’s on others. Some people blast them for one thing, some for the other.

    Harley has often built machines with more performance – the original FXRS, the FXRS-SP, the FXRT, the Dyna Glide Sport, the XR1200, the XL1200R, the XL883R, the V-ROD in all its incarnations, the original FLT/FLTC, generally at very reasonable price points when compared with the rest of the Harley line and the Europeans. None of them have ever sold in numbers that could justify keeping them around in the product mix. Only when Harley slammed the suspension and added some extra style did they sell – the later FXR’s, the Dyna Glide FXWG, the Road Glide, etc.

    Of course they are going to struggle for some incremental market share – they have a new formidable competitor in Indian, plus revitalized Triumph, BMW, and Moto Guzzi, not too mention the Japanese competition. Note that the Indian 110 motor everyone writes home about has 3 cams and pushrods and they are chain driven. So you can have 2 cams, 3 cams, or 4 cams. The Sportster engine has 4 gear-driven cams because that provides the best pushrod routing and the narrowest motor, if you are going to have a pushrod motor. The Victory Scout motor everyone is so excited about is 25hp+ down on the V-ROD motor with the same displacement. Yet when Harley made a V-ROD with mid-controls and a more “reasonable” seating position it sold even more poorly than the V-ROD does today. Not that the V-ROD is perfect by any means.

    Harley has to adjust, ultimately, to what its customers demand. The fact that the customers seem to be wanting more performance/handling lately may help the product mix move in a direction that some posters seem to desire. The fact that they continue to maintain such a large market share suggests that they know what they are doing. They face strong headwinds because of the competition – but also because of their customer base. Harley may be the only company on earth where the customers (voting with their dollars) consistently demand products that perform less well than what the company can and has offered.

  9. 9 boston jim Apr 20th, 2016 at 12:49 pm

    Tuesday, I got an email from my local Stealership! Starting this Thur., under a Huge Tent, they plan to sell 100 Bikes in 100 Hours. That’s Thur., Fri., Sat., & Sunday & they plan to pull an extra 4 hours out of their ass, to cover their ass!
    PS, Do you think they inspected & fixed all the 2006 & back, spring loaded cam chain tensioner Bikes ? I seriously doubt it, I bet they won’t even mention, that there might be a problem ! And that’s been the problem from the beginning! Not recalling one Bike, NOT owning up to the problem? Why should they, nobody’s got killed (have they) ? It’s a maintenance issue, like brake pads ? OH, OK! Boston Jim

  10. 10 1550tc Apr 20th, 2016 at 12:52 pm

    Woody this is all just internet investor porn in 4K

  11. 11 Woody's Apr 20th, 2016 at 2:24 pm

    Mmmmmm, investor pornnnnnnn 😉

  12. 12 NoH2oh Apr 20th, 2016 at 4:05 pm

    JM, have you seen the price$ on the new Bonnies? Not cheap any longer.

  13. 13 BobS Apr 20th, 2016 at 4:29 pm

    Wait until Victory and Indian squeeze H-D’s market share to about 35%. Their stock will be in the crapper, then BUY. Harley’s used to be cool, then every loser that needed to buy a lifestyle got one. During this time Harley has become a victim of its own marketing. They couldn’t offer anything other than crap because all the sheep-followers have become convinced that said crap is the only REAL motorcycle and nothing else can take their miserable existence to a lifestyle badass. Once their tattoo logo is up against the ropes and losing…then they will embrace a 1600 cc Revolution motor in a new Street Glide. As soon as the faithful embrace really good motorcycles, the MoCo will come roaring back again.

  14. 14 JM Apr 20th, 2016 at 4:33 pm

    The 900cc Street twin is $8,700.00 with ABS, made in Thailand. The new T120 starts at $11,500 for a 1200cc bike, also made in Thailand. Maybe they are not cheap, but they are not overly expensive either.

  15. 15 Blackmax Apr 20th, 2016 at 4:54 pm

    So Europe, the Middle East, Africa & Pacific Rim are the leaders for H-D now ??
    The American market is down for the “All American / Made in America” cycle …
    That 50% Market share just keep getting whittled away at, slowly but surely .
    Because there IS competition !!!
    H-D needs to come up with something
    & I don’t mean the 120RT they keep saying is coming or the 110 in the regular bikes …
    Gamechanger for H-D usually means a new engine as I agree, wholeheartedly with boston jim !!!
    Not gonna spend $20 to 30,000 on a twin cam anything that I’m going to have to
    put another $3500 to 6000 into it, with Andrews, Fueling, S & S, Revolution
    or any number of aftermarket parts to make it run correctly, when it should’ve run right
    from the factory in the first place !
    Hell, like I said a while ago, as soon as the warranty ran out,
    depending on the $$$ situation, S& S gear drive at the least
    or a whole new engine from them (S & S), JIMS, TP Engineering, Zippers or anybody !!
    (No Rev Tech or Ultima, sorry) ….

  16. 16 Woody's Apr 20th, 2016 at 5:11 pm

    2JM, I agree with most all of what you took the time to write, with one exception-Harley let their customers down by not taking advantage of doing the same basic products over & over to hone them down to precision machines like the stereotypical Swiss watch. Instead they squandered it on silly acquisitions & divestitures, high-fiving bonuses and manipulating head guys, and parlor tricks with labor and plant locations. Even the most half-hearted process control and dedication to engineering would have resulted in machines that would have made Hondas & Yamahas seem crude in comparison. I don’t know if Engineering lost their way, or were given unit cost numbers that dictated cost reduction over value engineering.
    Harley WAS walking a thin line between existing customers demanding tradition and threatening to “walk away if you hang a radiator on it” and similar mantras, but nobody ever said they’d understand if a timing chain tensioner was just too tricky to get right, or that tolerances that would be rejected on a Chinese bicycle were OK for an engine. The money they saved on the same basic engine for years in a row didn’t get translated into constant improvement and an ever decreasing amount of unhappy customers.

  17. 17 Meh Apr 20th, 2016 at 6:18 pm

    Woody’s post above nailed it. Harley do make a good liquid-cooled engine but deliberately limit its use, probably for cost reason.

    The V-Rod drivetrain would benefit from a decent touring chassis. Touring bodywork that hides the engine would be pure win. V-Rod baggers with RG fairings look good and work well, but that drivetrain would benefit from a purpose-built touring frame and suspension.

  18. 18 JM Apr 20th, 2016 at 7:29 pm

    My prediction is that, shortly after Scout production actutally ramps up (I have not seen one on the street yet, I live in California), you will see an XG750 with a flattrack frame, note that their factory team just ran an XG750 at the Austin Half mile. Then I think you get a 1000cc option. The V-ROD motor gets another bump in displacement to 1400cc and gets put into a touring frame (they already have test mules running in Arizona). Slowly Harley will trade Street sales for Sportster sales, and T-Rod (touring V-ROD) for Street/Road Glide sales. Long term, I think the Twin-Cam and Sportster motors will be replaced everywhere except in pure nostalgia models, maybe 1 Sportster, a couple Softails, and 1 Tourer. The Dynas will disappear.

  19. 19 burnout Apr 21st, 2016 at 10:00 am

    Agree with Woody’s.

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Cyril Huze