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Why Analysts Think Harley-Davidson's 3Q Earnings Will Remain Weak

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Part 4
Why Analysts Think Harley-Davidson's 3Q Earnings Will Remain Weak PART 4 OF 8

Will Harley-Davidson’s Revenues Continue to Weaken in 3Q17?

Existing trends in Harley’s revenues

In the second quarter of 2017, Harley-Davidson’s (HOG) revenues stood at ~$1.77 billion, 5.2% lower than its ~$1.87 billion in revenues in 2Q16. On the brighter side, the company’s 2Q17 revenues were slightly better than analysts’ estimates of $1.6 billion for the quarter. Weak international and US motorcycle retail sales were the main factor that affected HOG’s revenues in 2Q. Now, let’s see what Wall Street analysts are estimating for the company’s 3Q17 revenues.

Will Harley-Davidson&#8217;s Revenues Continue to Weaken in 3Q17?

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Third quarter estimates

Analysts were estimating Harley-Davidson’s revenues to be $0.96 billion in 3Q17. That’s about 12% lower than the revenues of $1.09 billion in the corresponding quarter of 2016.

Analysts estimate that the company’s full-year 2017 revenues will also drop to $4.93 billion. This annual revenues estimate reflects a decrease of about 6.3% from Harley’s $5.27 billion in revenues last year.

Key negative factors

For Harley-Davidson, the US is the largest single market, and most of its revenues come from the home market itself. For this reason, Harley’s dependence on US sales remains high. In 2016, HOG’s retail sales dropped ~3.9% YoY (year-over-year) in the US. This drop continued in the first half of the year as well, which is a reason for concern. Harley-Davidson’s management attributed this fall to continued weak demand from the US and strong competition.

Despite improved economic conditions in the country in the last two years, Harley has been struggling to boost its sales in the US. Significant improvement in the company’s US sales isn’t expected, which is likely why analysts think 3Q17 revenues will remain weak.

Legacy automakers (VCR) General Motors (GM), Ford (F), and Fiat Chrysler (FCAU) also earn the majority of their revenues from the US.

Continue to the next part to know what analysts are estimating for Harley-Davidson’s margins in 3Q17.

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