Harley-Davidson Q3 U.S. retail unit sales expectations revealed

BMO Capital Markets analyst Gerrick Johnson has provided Powersports Business readers with a research note related to Harley-Davidson reporting its Q3 2021 results on Wednesday, Oct. 27.

Among other insights, the BMO model “assumes US retail sales will decline -10% in the quarter (-12% globally), with US and global retail down -19% compared with 3Q19.”

Here’s Johnson’s report:

“We expect Harley-Davidson (HOG) to report adjusted 3Q21 EPS of $0.78, down from $1.05 in 3Q20. Our estimate is just above the Street consensus of $0.77. Overall retail demand has remained strong and the company’s new Pan America and Sporster S have been well received by customers and dealers, but slow shipping cadence has been frustrating and likely limited sales in the quarter.

“Key Points

“We expect 3Q21 sales to increase +12% to $1.08 billion, below the consensus of $1.14 billion (+19%). Our estimate is based on 43,052 motorcycle units shipped (+0.2%) and average unit price to increase +13%; the Street is expecting shipments of 49,021 (+14%).

“Investor focus has centered on slow shipment cadence, including some reports of HOG cancelling dealer orders. We think this bad news is likely incorporated into the stock price. Commentary around supply chain and shipment cadence will still be closely scrutinized.

“Our model assumes US retail sales will decline -10% in the quarter (-12% globally), with US and global retail down -19% compared with 3Q19. Based on Polk registration data, over the first two months of the quarter, HOG retail sales increased +2% y/y or -4% vs. 2019. However, we believe shipments to dealers slowed significantly towards the end of the quarter, hampering retail sales. Commentary around the Pan America and the Sporster S continues to be positive from dealers.

“We are looking for 3Q21 gross margin to decline 610 bps to 23.7% owing to cost inflation and COVID-related operational inefficiencies. We estimate financial services income of $90 million, ahead of the Street’s $86 million.

“In 2021, HOG expects +30% to +35% motorcycle segment revenue growth, operating margin of 6–8% (or 7–9% if the company is able to mitigate the EU tariffs), and HDFS growth of +75% to +85%. We calculate the implied EPS guidance to be about $3.10–3.65, excluding the EU tariffs. Currently, our 2021 revenue estimate is $4.4 billion (+35%) on shipments of 185,530 (+28%) units. Our adjusted EPS estimate is $3.55, up from $0.77 in 2020. The Street is expecting sales of $4.39 billion (+35%) on shipments of 189,472 (+30%) units and EPS of $3.54.”