Harley-Davidson Begins March 2018 on a Weak Note


Mar. 16 2018, Updated 7:31 a.m. ET

Harley-Davidson stock

Last week, Harley-Davidson stock (HOG) traded on a mixed note after dropping for the previous three weeks. The stock ended the week at $44.35, with a minor gain of ~0.3% for the week and a fall of~2.3% in March so far.

As of March 9, 2018, HOG had lost about 12.8% this quarter, whereas the S&P 500 had risen 4.2%. During the same period, US automakers (IYK) General Motors (GM) and Ford (F) had fallen 7.7% and 13.1%, respectively, while Tesla (TSLA) had risen 5.1%. Let’s find out what could be driving pessimism in Harley-Davidson stock lately.

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Dismal 2018 guidance

Between fiscal 2016 and 2017, Harley-Davidson’s operating margin narrowed to 12.5% from 14.7%. During its 4Q17 earnings conference call, the company’s management gave dismal guidance for 2018. Harley expects its 2018 operating profit margin to be 9.5%–10.5%, narrower than its 12.5% margin in 2017.

In 4Q17, Harley’s adjusted EPS (earnings per share) were $0.47, ~74.1% higher than its EPS in 4Q16. The company’s global motorcycle retail sales fell ~9.6% due to ongoing weak demand in its key US, Asia-Pacific, and European markets.

Also, HOG’s gross margin was almost flat, at 30.9% in 4Q17 and 30.7% in 4Q16. Consistent weakness in sales in its key markets could be a key reason why HOG stock traded on a weak note in 2017.

Key technical levels to watch

The stock’s 14-day RSI (relative strength index) score was hovering well below the line of equilibrium, at 35.4, reflecting underlying weakness in its momentum. Key horizontal support lies near $43.90, and a violation of this support could attract renewed selling pressure on the stock.


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