Getchermotorrunnin', investors. It's time to head out on the Wall Street Highway and listen to some earnings news from Harley-Davidson (NYSE:HDI). The hogmeister reports fiscal Q1 2006 earnings tomorrow morning.
What analysts say:
- Buy, sell, or waffle? We have a split decision on Harley. Its 17 analysts are split down the middle -- with three saying buy, three calling for sells, and the other 11 all saying hold.
- Revenues. Sales are projected to rise 4% to $1.29 billion for the quarter.
- Earnings. Profits are predicted to rise 12% to $0.86 per share.
What management says:
In January's Q4 and full-year earnings report, Harley CEO Jim Ziemer had this to say about the firm's future: "We believe the prospects for retail growth remain strong and support a wholesale unit growth rate in the range of 5% to 9% annually and an annual EPS growth rate of 11% to 17%." And this about its recent past: "Gross margin for the fourth quarter of 2005 was 38.3% of revenue, up from 37.8% for the same period in 2004. Consistent with the higher gross margin, operating margin increased from 23% in 2004 to 23.4% in 2005."
What management does:
This isn't an isolated, just-this-one-quarter thing, either. Taking the broader view of trailing-12-month results, Harley's margins have been expanding on the gross, operating, and net levels for 18 months now. If the firm can keep that up, its promises of earnings growth in excess of sales growth appear realistic.
|
Margins % |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
12/05 |
|---|---|---|---|---|---|---|
|
Gross |
38.8 |
39.2 |
39.2 |
39.1 |
39.3 |
39.3 |
|
Op. |
25.2 |
25.6 |
25.8 |
25.5 |
25.9 |
25.9 |
|
Net |
16.4 |
16.7 |
16.9 |
16.7 |
16.9 |
16.9 |
One Fool says:
I also like the look of Harley's balance sheet. Despite growing its year-over-year sales by 10% over the last six months, the company's accounts receivable have hardly budged, and its inventories have actually declined a bit. This suggests that demand for Harley's bikes remains strong and argues in favor of the firm having pricing power that will also contribute to its ability to expand margins in the future.
Competitors:
Harley may be one of a kind, but in the competition for consumers' discretionary transportation dollars, the firm competes more broadly with firms such as:
- Honda (NYSE:HMC)
- Polaris (NYSE:PII)
- Arctic Cat (NASDAQ:ACAT)
- Marine Products (NYSE:MPX)
Marine Products is a Motley Fool Hidden Gems pick. Take the newsletter dedicated to small caps for a 30-day free spin.
Fool contributor Rich Smith does not own shares of any company named above.
