RBC: ‘No major surprises’ in Harley’s Q1 report

Harley-Davidson’s first quarter results were close to what was expected from RBC analysts and Wall Street consensus, RBC Capital Markets analyst Edward Aaron reported.

“With earnings in line and guidance unchanged, there were no major surprises in Q1. Retail sales will be viewed as a small negative, while gross margin will be viewed as a small positive,” he wrote.

Harley’s earnings per share of $0.99 were in-line with consensus, and they exceed RBC expectations by $0.02. The company’s $1.414 billion in sales were slightly below RBC’s $1.426 billion, and the consensus $1.463 billion.

“Gross margin met Street expectations, which we think will be viewed as a marginal positive. Gross margin of 36.7% expanded 80 bps y/y and was a touch better than our 36.6% estimate. We believe some investors were concerned that Street Q1 estimates were set somewhat aggressively relative to management's commentary last quarter that Q1 gross margin would show ‘modest’ expansion,” Aaron wrote.

The 12.7 percent decrease in U.S. retail sales were lower than the expected 8-10 percent decrease.

“Management continues to expect full-year shipment guidance of 259-264K bikes and gross margin in the 35.25%-36.25% range,” Aaron wrote. “Q2 shipments were guided to 80,000-85,000 units, in line with last year's shipments of 83,502. While slightly below our 86,245 estimate, we believe Q2 shipments are in line to slightly better than buy-side expectations.”

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