Could Harley-Davidson Stock Remain Weak in 4Q17?


Nov. 20 2020, Updated 11:07 a.m. ET

Harley-Davidson stock

During the week ended November 3, Harley-Davidson stock (HOG) traded on a negative note. It ended the week at $47.04 with an ~1.7% weekly loss. The company’s stock has lost ~19.4% year-to-date and has seen a value erosion of 2.4% in 4Q17 so far.

Let’s see what factors could be hurting Harley-Davidson stock these days.

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Key negative factors

In 3Q17, Harley-Davidson’s adjusted earnings were $0.40 per share. These earnings were ~37.5% lower than its earnings in 3Q16. During the quarter, the company’s global revenues fell ~12.0% due to its deteriorating retail sales in its key markets, including the US, Europe, and the Asia-Pacific region.

HOG reported weaker gross margins of 24.5% in 3Q17 compared to 28.8% in 3Q16. These negative factors could haunt HOG investors in 4Q17.

Notably, Harley-Davidson’s profitability has shrunk in the last few quarters due to unfavorable product mix. For HOG, lightweight motorcycles tend to yield lower profit margins compared to its margins from its heavyweight motorcycles.

Similarly, legacy automakers (IYK) such as Ford (F), General Motors (GM), and Honda (HMC) also make higher profits from heavyweight vehicles than small cars.

No change in technical outlook

In October 2017, Harley-Davidson (HOG) stock turned negative again and lost about 1.8% after gaining 2.6% in September. On November 6, the stock breached a prior key support level near $45.90, which should act as an immediate resistance going forward.

The next horizontal support level lies near $42.40. On the daily price chart, its 14-day RSI (relative strength index) indicator was hovering below the line of equilibrium at 35.9. This indicator highlighted a negative bias in the underlying momentum.

In the final part of this series, we’ll look at some of the key reasons behind O’Reilly Automotive’s negative trading trend last week.


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