BMO Capital Markets analyst Gerrick Johnson provided a research note to Powersports Business following the Harley-Davidson Q3 earnings call.
Here’s Johnson’s comment:
“Harley-Davidson (HOG) posted better-than-expected 3Q21 financial results, with retail sales, motorcycle shipment, and HDFS all ahead of estimates. Management expressed confidence in its business and turnaround. HOG is experiencing cost pressures and supply chain issues, just like the rest of the leisure industry. But in HOG's case, we think tight supply works in its favor giving it cover as it realigns its dealer base and model mix. We continue to see more growth opportunities ahead as HOG revitalizes the brand and builds out its new motorcycle lineup.
“HOG reported 3Q21 adjusted EPS of $1.18. The results were ahead of our adjusted $0.78 estimate, the Street consensus of $0.77, and reported $1.05 in 3Q20.
“HOG’s motorcycle-related sales increased +20% to $1.16 billion, ahead of our expectation for a +12% increase to $1.08 billion, and the Street consensus of $1.14 billion (+19%). Revenue from parts & accessories declined -3%, while general merchandise was flat y/y as the company realigns and rationalizes that business.
“The company shipped 47,941 motorcycles (+12% y/y), greater than our expectation for 43,052 units (+0.2%) but below the Street estimate of 49,021 (+14%). Revenue per motorcycle increased $1,781 (+7.9%) to $24,209.
“Worldwide retail sales declined -6%, better than our -12%. +1.3% U.S. growth was well ahead of our -10%, while the international decline of -15% was in line with our -15% expectation. HOG has purposely eliminated certain models in some regions.
“Management noted North American retail was up on a rebound in Touring bikes (likely due to the Icons Collection) and incremental sales of the new Pan America and Sportster S - both of which are selling like hotcakes.
“HOG tweaked its 2021 guidance. While motorcycle revenue growth expectation of +30% to +35% remained unchanged, its Financial Services segment operating income is now expected to grow +95% to +105%, up from prior guidance of +75% to +85%. HOG still expects operating margin of 6% to 8% assuming the EU tariffs remain at 31% in October and November, and then increases to 56% in December.
“The implied 4Q guidance range is quite large, with management attributing that to ongoing volatility around the supply chain. In the quarter, HOG is estimating logistics costs will be up 100% y/y, manufacturing costs will up +35% y/y, and materials/components will be up +6% to +7% y/y.”