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Goldman Sachs Rated Harley-Davidson as ‘Neutral’

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Price movement

Harley-Davidson (HOG) has a market cap of $10.2 billion. It fell 0.91% to close at $57.91 per share on December 28, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -3.1%, -2.6%, and 31.4%, respectively, on the same day.

HOG is trading 3.3% below its 20-day moving average, 0.20% below its 50-day moving average, and 14.1% above its 200-day moving average.

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Related ETF and peers

The Vanguard Mid-Cap ETF (VO) invests 0.27% of its holdings in Harley-Davidson. VO’s YTD price movement was 11.5% on December 28.

The market caps of Harley-Davidson’s competitors are as follows:

  • Polaris Industries (PII)—$5.1 billion
  • Textron (TXT)—$13.1 billion

HOG’s rating

Goldman Sachs initiated its coverage of Harley-Davidson with a “neutral” rating and also set the stock’s price target at $57.00 per share.

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Performance of Harley-Davidson in 3Q16

Harley-Davidson (HOG) reported 3Q16 Motorcycle and Related Products revenues of $1.09 billion, a fall of 4.4% from the $1.14 billion reported in 3Q15. The company reported motorcycle shipments of 48,611 units in 3Q16, a fall of 9.1% from 3Q15.

The company’s gross profit and operating margins of Motorcycle and Related Products fell 100 basis points and 260 basis points, respectively.

The company’s Financial Services revenues rose to $183.2 million in fiscal 3Q16, a rise of 3.4% over 3Q15. Its net income and EPS (earnings per share) fell to $114.1 million and $0.64, respectively, in 3Q16, compared with $140.3 million and $0.69, respectively, in 3Q15.

Harley-Davidson’s cash and cash equivalents and finance receivables rose 9.4% and 7.4%, respectively, and its inventories fell 27.2% between 4Q15 and 3Q16.

Projections

Harley-Davidson (HOG) has made the following projections for fiscal 2016:

  • to ship 264,000–269,000 motorcycles, a growth of -1%–1% over 2015
  • operating margin in the range of ~15%–16% for the Motorcycles segment
  • capital expenditure in the range of $255 million–$275 million
  • effective tax rate of ~33%

In fiscal 4Q16, the company expects to ship 44,200–49,200 motorcycles. Next, we’ll look at Berry Plastics Group (BERY).

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