Harley-Davidson expected Q2 earnings ahead of Thursday results

Powersports Business has been provided a research note by BMO Capital Markets analyst Gerrick Johnson, analyzing Harley-Davidson's Q2 earnings before the report is released Thursday, July 28.

Here’s a look at BMO’s expectations:

“We expect Harley-Davidson (HOG) to report adjusted 2Q22 EPS of $0.73, down from $1.34, and below the Street's $1.16. We expect 2Q22 sales to decline -11% to $1.18 billion, also below the consensus of $1.27 billion (-3%). Our estimate is based on 44,675 motorcycles shipped (-21%) and +7% average revenue per unit.

“On June 30, we shifted 8,075 units ($155 million of revenue), out of our 2Q model and into 3Q to reflect HOG’s two-week production shutdown owing to a ‘regulatory compliance matter’ related to a supplier part.

“We expect U.S. retail sales will have declined -24% in the quarter (-19% globally, -7% international). This decline is entirely due to lack of supply, including the two-week production shutdown mentioned above. Polk registration data suggests that, over the first two months of the quarter, HOG’s U.S. retail registrations had declined -22% y/y (-16% vs. 2019).

“Our recent channel checks have been positive, with strong demand that is still outpacing supply. Many new bike models and limited editions are sold before they hit the floor. We have not had any feedback that customers are canceling pre-orders. We believe dealer inventory at the end of the quarter was down -24% y/y (-39% U.S., -8% international), and down over -50% compared to 2Q19.

“We believe HOG will maintain its 2022 guidance for +5% to +10% motorcycle segment revenue growth and operating margin of 11% to 12% (vs. 9.1% in 2021), despite the two-week production shutdown. We anticipate that lost 2Q production will be made up in 3Q. Harley-Davidson Financial Services (HDFS) operating income is expected to decline by -20% to -25% given a normalization of allowance releases and loss rates. All in, implied EPS guidance is in the range of $4.05 to $4.50, with a midpoint of $4.28.

“For 2022, we currently expect motor company revenue growth of +11% to $5.02 billion, operating margin of 11.2%, HDFS operating income to decline -19% to $338 million, and EPS of $4.60.

“The current Street consensus is for motor company revenue of $4.89 billion (+8%), operating margin of 10.9%, HDFS income of $328 million (-21%), and EPS of $4.22. Looking further out, HOG’s Hardwire Stage II plan calls for HDMC revenue to grow a +5% to +7% CAGR through 2025 with 2021 as its base.

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