In 2017, popular motorcycle maker Harley-Davidson (HOG) held the largest share of the US heavyweight motorcycle market. However, the company’s stock underperformed auto stocks, falling ~12.8%. This year, HOG had fallen 15.6% as of June 6, marking the worst performance in the auto industry. In comparison, auto stocks (FXD) Honda (HMC) and Ford (F) have fallen 5.5% and 3.1%, respectively, year-to-date, while General Motors (GM) has risen 7.2%.
Mixed ratings for Harley-Davidson
Of the analysts covering Harley-Davidson stock on June 6, most (70%) recommended “hold,” while 25% recommended “buy” and 5% recommended “sell.” Their 12-month target price for the stock was $48.46, reflecting a 12.9% upside based on its market price of $42.94. Their target price three months ago was $51.86. The company’s continuously troubled motorcycle sales could be one reason for analysts reducing their target price for the stock.
Weakness in earnings and sales
In the first quarter, Harley’s adjusted EPS fell 1.9% YoY (year-over-year), but its margin beat analysts’ estimate. The company’s global retail sales fell ~7.2% YoY, resulting in its revenue falling 2.7%. Its motorcycle gross margin narrowed YoY to 34.7% from 35.7%, driven by lower sales volumes, higher raw material prices, and higher manufacturing expenses.
Continued weakness in the company’s retail sales and higher steel and aluminum prices could hurt Harley-Davidson’s 2018 earnings. Continue to the next part, where we’ll compare automakers’ valuation.