Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Harley-Davidson Inc (NYSE:HOG) fell as much as 10% early Tuesday after the iconic motorcycle manufacturer reported strong first-quarter results, but followed with disappointing guidance. By noon shares were down about 8% from the previous close.
So what: Consolidated quarterly revenue fell 3.5% year over year to $1.67 billion, including $1.26 billion from the sale of 56,661 motorcycles worldwide, $183.9 million from motorcycle parts and accessories, $66.4 million from general merchandise, and $162.4 million from Harley's financial services segment. That translated to a 4% increase in diluted earnings per share to $1.27, helped by Harley's repurchase of 2.9 million shares of common stock during the quarter for $182.5 million. As of the end of the quarter, roughly 18.6 million shares remained under Harley's approved repurchase authorization.
Analysts, on average, were only expecting earnings of $1.25 per share on revenue of $1.58 billion.
However, Harley also revised its full-year guidance for motorcycle shipments, and now expects to ship 276,000 to 281,000 motorcycles to dealers and distributors worldwide this year. That's still an increase of 2% to 4% over 2014, but Harley had previously guided for shipments of 282,000 to 287,000 motorcycles in 2015.
Now what: Harley-Davidson CEO Keith Wandell explained, "Given the first-quarter retail results, and ongoing, increased levels of aggressive competitive discounting in the U.S. which we expect will continue, we are taking the precautionary step of lowering our estimated growth rate for full-year motorcycle shipments in order to manage supply in line with demand and protect the premium nature of our brand."
However disappointing the reduced guidance might be, it's hard to fault Harley management for favoring prudence in favor of maintaining the long-term health of the company. While I can't blame the market for taking a step back today, that's why I think Harley-Davidson stock should still be able to reward patient investors over the long run.