Harley-Davidson releases Q2 earnings

Harley-Davidson, Inc. (NYSE:HOG) second quarter 2016 diluted earnings per share increased 7.6 percent to $1.55 compared to diluted EPS of $1.44 in the same period in 2015. Net income was $280.4 million on consolidated revenue of $1.86 billion compared to net income of $299.8 million on consolidated revenue of $1.82 billion in last year’s second quarter.

Harley-Davidson worldwide retail motorcycle sales in the second quarter were down 1.9 percent on weak U.S. industry results. Harley-Davidson retail motorcycle sales in the U.S. were down 5.2 percent compared to the year-ago quarter, with the overall U.S. industry down 8.6 percent for the same period. Harley-Davidson U.S. market share for the quarter was 49.5 percent, an increase of 2.0 points over the same period in 2015. International retail sales increased by 4.3 percent over the prior year quarter.

“We are pleased with our ability to gain market share in the U.S.,” said Matt Levatich, president and Chief Executive Officer, Harley-Davidson, Inc. “Competitiveness in the U.S. remains intense, and our demand-driving investments are showing traction.”

Through six months, Harley-Davidson’s 2016 net income was $530.9 million on consolidated revenue of $3.61 billion compared to six-month 2015 net income of $569.7 million on consolidated revenue of $3.50 billion. Six-month 2016 diluted EPS was $2.91, up 7.4 percent from $2.71in the year-ago period.  Worldwide retail motorcycle sales were down 0.6 percent from the same period in 2015. International sales were up 4.4 percent, offset by a 3.4 percent decline in U.S. retail sales.

Given market softness in the U.S., the continued competitive environment and global economic uncertainty, the company is taking the precautionary step of lowering its full-year shipment guidance. The company now expects to ship 264,000 to 269,000 motorcycles to dealers worldwide in 2016. This action is consistent with the company’s long-standing commitment to manage supply in line with demand.

“While our investments to grow product awareness and ridership globally are beginning to take hold in a number of markets, current conditions in the U.S. and economic headwinds in other parts of the world  combine to raise caution for us as we continue to focus our strategy to drive demand and deliver strong returns to shareholders,” said Levatich.

Guidance
Harley-Davidson is revising its full-year guidance for motorcycle shipments and now expects to ship 264,000 to 269,000 motorcycles to dealers worldwide in 2016, which is approximately down 1 percent to up 1 percent from 2015. The company had previously provided full-year shipment guidance of 269,000 to 274,000 motorcycles.  In the third quarter, the company expects to ship 48,500 to 53,500 motorcycles compared to 53,472 motorcycles shipped in the year-ago period. The company now expects full-year 2016 operating margin of approximately 15 to 16 percent for the Motorcycles segment, compared to prior guidance of 16 to 17 percent. The company continues to expect 2016 capital expenditures for Harley-Davidson, Inc. of $255 million to $275 million.

Income Tax Rate
For the first half of 2016, Harley-Davidson’s effective tax rate was 32.7 percent compared to 34.9 percent in 2015. The lower rate is due to the successful closure of various tax audits. The company now expects its full-year 2016 effective tax rate will be approximately 33 percent.

Cash Flow
Cash and marketable securities totaled $869.7 million at the end of the second quarter, compared to $1.30 billion in the year-ago quarter. During the first six months of 2016, Harley-Davidson generated $456.3 million of cash from operating activities compared to $613.9 million for the same period in 2015.

Shareholder Returns
The company paid a cash dividend of $0.35 per share for the second quarter for a total of $0.70 for the first six months of 2016. On a discretionary basis, the company repurchased 2.6 million shares of Harley-Davidson common stock for $118.9 million.  In the second quarter of 2016, there were approximately 181.3 million weighted-average diluted shares outstanding, compared to approximately 208.6 million shares in the year-ago quarter. At the end of the second quarter, 23.0 million shares remained on board-approved share repurchase authorizations.