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Here’s Why Weakness in Harley-Davidson Stock Could Continue

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Harley-Davidson stock

Last week, Harley-Davidson stock (HOG) continued to trade on a negative note for the second consecutive week. The stock ended the week with a fall of ~1.8%. As of August 13, the company’s stock was hovering in the negative territory quarter-to-date, with a 1.7% fall seen in the third quarter so far.

In the third quarter so far, auto stocks (IYK) General Motors (GM), Toyota Motor (TM), and Ford Motor Company (F) have fallen ~8.2%, 4.1%, and 14.5%, respectively.

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Fundamental weakness continues

Last month, Harley-Davidson’s management announced its second-quarter results. While its adjusted EPS for the quarter fell ~2% YoY (year-over-year) to $1.45, it managed to beat analysts’ consensus EPS estimate of $1.34.

In the second quarter, HOG’s total revenue fell 2.9% YoY to $1.71 billion, including a ~4% YoY fall in its Motorcycle segment’s revenue. The company’s global motorcycle shipments fell 11.3% YoY in the quarter, reflecting a weakening sales trend.

The operating profit margin in Harley’s Motorcycle segment contracted significantly to 16.0% in the second quarter from 20.1% a year earlier.

Weakness could continue

On August 13, HOG stock settled at $41.38, not far above its support level of near $40.90. Overall, its better-than-expected second-quarter earnings results could be one of the key reasons why its stock has been trading on a positive note in the third quarter so far. However, its weakening sales and its Motorcycle segment could keep its stock under pressure going forward.

Be sure to visit Market Realist’s Automobiles page for detailed analyses of auto companies’ recent earnings reports.

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