3 American Brands Firing on All Cylinders

Ford, Polaris, and Harley-Davidson are strongly positioned to continue accelerating in 2014 and beyond.

Jan 31, 2014 at 5:46PM

Not too long ago, iconic American brands like Ford (NYSE:F), Harley-Davidson (NYSE:HOG), and Polaris (NYSE:PII) were languishing due to lackluster customer demand during the financial crisis, and rising competitive pressure from international players. But the three companies have made impressive turnarounds during the last years, and recent earnings reports confirm that they continue firing on all cylinders.

Ford is back with a vengeance
Ford was under heavy financial pressure during the financial crisis in 2008 and 2009, but the company has come a long way since then. Ford's financial position has materially improved over the years, and the company is now rated as investment grade by the major credit rating agencies. In a clear sign of financial strength and confidence, Ford doubled its dividends in 2013, and then increased payments again by 25% in 2014.

The housing recovery has provided a powerful tailwind for the company by reigniting sales of its profitable F-Series trucks, and successful models like Fusion, Escape, and Fiesta have produced market-share gains for Ford in the light vehicles segment.

Ford reported earnings for the fourth quarter of 2013 on Tuesday, and investors have valid reasons to feel confident about the future of the company. Wholesale volume increased by 12% in 2013 versus the previous year, and revenues grew by 10% year over year. The company also reported record automotive operating-related cash flow of $6.1 billion for the full year.

CEO Alan Mulally is sounding quite optimistic about the company's prospects:

We are well positioned for another solid year in 2014, as we continue our plan to serve customers in all markets around the world with a full family of vehicles -- small, medium and large; cars, utilities and trucks -- with the very best quality, fuel efficiency, safety, smart design and value.

Polaris continues accelerating
Investors are getting used to receiving positive news from Polaris during the last years; perhaps that's the main reason why the company's latest earnings report was received without much enthusiasm in spite of the fact that the company delivered some truly outstanding financial figures.

Sales during the fourth quarter of 2013 increased by a remarkable 20% versus the same quarter in the prior year, to $1.08 billion, and earnings per share jumped by 26% to a record high of $1.56 during the quarter.

Polaris acquired Indian Motorcycles in August 2013, and the acquisition is already delivering sound results as motorcycle sales increased by 94% during the fourth quarter, driven entirely by Indian. The outlook for Indian sales is quite strong according to management: "The shipped Indians are selling quickly and early buyer satisfaction and quality ratings are outstanding."

Guidance was below analysts' forecasts: Polaris estimates that revenues will increase between 11% and 14% in 2014. This would mean sales in the range of $4.19 billion to $4.31 billion versus analyst forecasts of $4.31 billion. Management is also calculating earnings per share to be in the range of $6.17 to $6.37 versus an average estimate of $6.67 per share by Wall Street analysts.

However, considering that Polaris tends to consistently deliver better-than-expected performance, it wouldn't be a big surprise to see the company beating both its own guidance and Wall Street forecasts in 2014.

A powerful brand
Harley-Davidson owns one of the most valuable brands the industry, and this represents a crucial competitive advantage differentiating the company from other players in the business. In the words of Warren Buffett, "Any company that gets its customers to tattoo ads on their chests can't be all bad."

Harley is adding more variety to its product lines in order to expand beyond its core demographic group. Eight of the company's new bikes in its 2014 lineup benefit from an initiative called Project Rushmore, which is aimed at not only improving product quality and production efficiency, but also attracting a broader audience to the company's products.

Sales during 2013 increased by 5.7% versus the previous year, and the company realized $310 million in savings from restructurings. Earnings per share were particularly strong during the year with a jump of 20.6% versus 2012.

Perhaps more important, the company provided a strong outlook for 2014: Harley-Davidson expects to ship 279,000 to 284,000 motorcycles to dealers and distributors worldwide in 2014, an increase of between 7% and 9% from 2013 shipments

Bottom line
Ford, Polaris, and Harley-Davidson have many things in common. The three iconic American brands have made remarkable improvements during the last years, and they continue delivering healthy performance as of the last quarter. Even better, the three companies look well positioned to continue gaining speed in 2014 and beyond.

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Andrés Cardenal owns shares of Ford. The Motley Fool recommends Polaris Industries. It recommends and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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