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Harley-Davidson (HOG) Q3 Earnings: What’s in the Cards?

Zacks

Harley-Davidson, Inc. HOG is set to report third-quarter 2017 earnings results on Oct 17, before the market opens. Last quarter, the company delivered a positive earnings surprise of 8.03%.

Harley-Davidson is the world’s leading designer and manufacturer of heavyweight motorcycles. The stock has seen the Zacks Consensus Estimate for current-quarter’s earnings being revised 2.4% downward over the last 30 days to 41 cents per share.

Let us see how things are shaping up for this announcement.

Harley-Davidson, Inc. Price and EPS Surprise

Factors Influencing This Quarter

In the third quarter of 2017, the motor company expects to dispatch around 39,000-44,000 motorcycles, representing a decline of 10-20% from the year-ago period. Also, stiff competition and huge price discounting might hit Harley-Davidson’s retail sales.

Additionally, Harley-Davidson will be paying $15 million as settlement charges to the Environmental Protection Agency due to its super tuners releasing harmful emissions despite power generation. Of the total amount, a whopping $12 million will be paid as civil penalty. Per the deal, the company will also buy back all the devices and discontinue future sales of the product. These actions will further add to its expenses.

However, in order to increase its customer base, Harley-Davidson focuses on expanding product portfolio and making long-term investments. The company aims to launch 100 new motorcycle models by 2027. Further, to improve the international reach, it has been adding new dealerships with a target of clinching 150 to 200 new global contracts by 2020. With these initiatives, the company expects to achieve positive growth in overseas retail sales in the second half of 2017.

Earnings Whispers

Our proven model does not conclusively show that Harley-Davidson is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below:

Zacks ESP: Harley-Davidson has an Earnings ESP of -4.45% as the Most Accurate estimate is pegged at 39 cents, lower than the Zacks Consensus Estimate of 41 cents. A positive ESP on the other hand, serves as an indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Harley-Davidson currently carries a Zacks Rank #3, which increases the predictive power of ESP and chances of an earnings beat. However, combined with a negative Earnings ESP, surprise prediction becomes inconclusive.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Price Performance

Shares of Harley-Davidson have declined 20.3% year to date, substantially underperforming the industry’s 26.7% rally.




Stocks to Consider

Here are some stocks worth considering from the Auto industry as per our model, these have the right combination of elements to beat estimates this quarter:

Magna International, Inc. MGA has an Earnings ESP of +0.32% and carries a Zacks Rank #2. The company is expected to release third-quarter 2017 results on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cummins Inc. CMI has an Earnings ESP of +0.45% and also carries a Zacks Rank of 2. The company is expected to release third-quarter 2017 results on Oct 31.

Ranked Goodyear Rubber & Tire Company GT has an Earnings ESP of +3.29% and holds a Zacks Rank #2. The company is expected to release third-quarter 2017 results on Oct 27.

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