Harley-Davidson Beats Q1 2019 Estimates, but Its Profits Tank

Harley-Davidson’s first-quarter earnings

On April 23 before the market opened, legacy motorcycle maker Harley-Davidson (HOG) reported its first-quarter earnings results. In the quarter, the company’s adjusted EPS fell 22.3% YoY (year-over-year) to $0.80.

Nonetheless, its earnings were significantly better than Wall Street analysts’ consensus estimate of $0.65 according to the data compiled by Thomson Reuters.

Harley-Davidson Beats Q1 2019 Estimates, but Its Profits Tank

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Sales weakness continues

In the first quarter, HOG’s revenue from its Motorcycles and Related Products segment fell 12.3% YoY to $1.20 billion, in line with analysts’ consensus estimate. A 7.9% YoY fall in the company’s motorcycle shipments acted as the primary negative factor affecting its first-quarter revenue.

In the quarter, Harley-Davidson’s motorcycle retail sales fell YoY in all its key markets, including 4.2% YoY in its home market—US retail sales. The company’s overall retail sales in the international market fell 3.3% YoY in the first quarter, which included a 0.6% fall in its European market retail sales.

Profit margins contracted sharply

In the first quarter of 2019, Harley-Davidson’s gross profit fell 26.7% YoY. Its lower gross profit pressured its gross profit margin, which contracted to 29.1% in the quarter compared to 34.7% in the first quarter of 2018. Similarly, the company reported a 3.6-point contraction in its operating margin to 9.1% in the first quarter.

The company blamed lower sales volumes, a negative product mix, currency headwinds, higher raw materials costs, and incremental tariffs for its deteriorating profit margins.