Earnings Release. Is Harley Davidson A Buy?

Harley-Davidson, Inc. (“Harley-Davidson“) (NYSE:HOG) today reported first quarter results.

“I am very pleased with the pace of recovery that we have seen across our business, as demonstrated by the strong financial results this quarter. The actions we have taken to reshape the business are having a positive impact on our results, especially for our most important North American region,” said Jochen Zeitz, chairman, president and CEO, Harley-Davidson.

“We can see the initial signs of consumer excitement and optimism returning and I am confident Harley-Davidson in 2021 is a significantly leaner, faster, and more efficient organization which is ready to win and successfully deliver on our 5-year Hardwire strategy, as the most desirable motorcycle brand in the world.”

First Quarter 2021 Highlights, Results and Related Guidance

   -- Delivered Q1 GAAP diluted EPS of $1.68, up $1.23 over Q1 2020 
 
   -- Motorcycles and Related Products (Motorcycles) segment revenue up 12 
      percent amid strong retail demand for Touring motorcycles 
 
   -- Significantly improved Motorcycles segment gross margin and operating 
      margin driven by favorable mix following the Rewire product portfolio 
      adjustments, lower sales incentives and reduced SG&A 
 
   -- Financial Services segment Q1 2021 operating income growth of $96 million 
      over Q1 2020 driven by a favorable adjustment to the provision for credit 
      losses 
 
   -- Increased Q1 cash flow from operations to $163 million, up $171 million 
      over Q1 2020 
 
   -- Increasing 2021 full-year guidance on Motorcycles segment revenue, 
      Motorcycles segment operating margin assuming the company is able to 
      mitigate additional EU tariffs, and Financial Services segment operating 
      income

First Quarter 2021 Results

Harley-Davidson, Inc. Consolidated Financial Results

 
 
 $ in millions (except EPS)   1(st) quarter 
                              2021    2020    Change 
Revenue                       $1,423  $1,298  10% 
Net Income                    $259    $70     272% 
GAAP Diluted EPS              $1.68   $0.45   273% 
Adjusted Diluted EPS          $1.68   $0.45   273% 

Consolidated revenue was up 10 percent in the first quarter over Q1 2020. Bottom-line results reflect Q1 significant net income improvement with strong results in both the Motorcycles and the Financial Services segments.

Harley-Davidson Retail Motorcycle Sales

 
 
 Motorcycles (thousands)   1(st) Quarter 
                           2021  2020  Change 
North America              32.8  25.2  30% 
EMEA                       4.9   7.7   (36)% 
Asia Pacific               5.8   5.8   1% 
Latin America              0.7   1.8   (59)% 
Worldwide Total            44.2  40.4  9% 

Global retail motorcycle sales in the first quarter were up 9 percent, driven by very strong Q1 U.S. retail growth over Q1 prior year. EMEA retail sales declines were impacted by continued COVID lockdowns, the company’s decision not to continue selling Street or Sportster motorcycles in Europe and shipping delays brought on by the pandemic. In Latin America, retail sales were impacted by the reduction in dealers and pricing actions across the portfolio, which were executed as part of the Rewire strategy.

Motorcycles and Related Products Segment Results

 
 
 $ in millions                     1(st) Quarter 
                                   2021    2020    Change 
Motorcycle Shipments (thousands)   54.8    53.0    3% 
Revenue                            $1,232  $1,100  12% 
  Motorcycles                      $1,016  $899    13% 
  Parts & Accessories              $150    $135    11% 
  General Merchandise              $50     $49     2% 
Gross Margin                       34.1%   29.0%   5.1 pts. 
Operating Income                   $228    $85     169% 
Operating Margin                   18.5%   7.7%    10.8 pts. 

Revenue from the Motorcycles and Related Products segment was up during the first quarter primarily driven by a 3 percent increase in wholesale shipments and a favorable mix of Touring motorcycles. First quarter global retail motorcycle sales were up 9 percent, driven by a 31 percent retail growth in the United States.

Parts and Accessories revenue was mostly in-line with Motorcycles revenue growth while General Merchandise was up 2 percent over Q1 2020.

First quarter gross margin was up 5.1 percentage points to Q1 prior year while first quarter operating margin finished up 10.8 percentage points over Q1 prior year due to stronger mix, the near elimination of sales incentives and lower spending versus prior year.

Financial Services Segment Results

 
 
 $ in millions     1(st) Quarter 
                   2021  2020  Change 
Revenue            $190  $198  (4)% 
Operating Income   $119  $23   417% 

Financial Services segment operating income was up significantly over prior year in the first quarter, primarily driven by a $102 million decrease in the provision for credit losses.

Other Results

Harley-Davidson generated $163 million of cash from operating activities during Q1 2021, $171 million favorable to Q1 2020. Cash and cash equivalents were $2.3 billion at the end of the first quarter, up $856 million to the end of the prior year first quarter.

Tax Rate – The company’s first quarter effective tax rate was 24 percent.

Dividends – The company paid cash dividends of $0.15 per share in Q1 2021.

2021 Outlook

As a result of its Q1 performance, for the full-year 2021, the company now expects:

   -- Motorcycles segment revenue growth to be 30 to 35 percent, an increase 
      from the previously communicated growth range of 20 to 25 percent. 
 
   -- Motorcycles segment operating income margin of 7 to 9 percent, which is 
      200 basis points better than previous guidance. Assuming the company is 
      not able to mitigate the additional EU tariffs to any extent in 2021, the 
      company expects the operating income margin would be 5 to 7 percent, in 
      line with original guidance. 
 
   -- Financial Services segment operating income growth of 50 to 60 percent, 
      an increase from the previously communicated range of 10 to 15 percent.

Additionally, for the full-year 2021, the company continues to expect:

   -- Capital expenditures of $190 million to $220 million.

Cash allocation priorities remain to first fund growth through The Hardwire initiatives, then to pay dividends and, given the company’s continued strong cash position, the company will be evaluating share repurchases and may choose to repurchase shares.

 

HOG

 

Company Background

Harley-Davidson, Inc. is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services. Our vision: Building our legend and leading our industry through innovation, evolution and emotion. Our mission: More than building machines, we stand for the timeless pursuit of adventure. Freedom for the soul. Our ambition is to maintain our place as the most desirable motorcycle brand in the world. Since 1903, Harley-Davidson has defined motorcycle culture by delivering a motorcycle lifestyle with distinctive and customizable motorcycles, experiences, motorcycle accessories, riding gear and apparel. Harley-Davidson Financial Services provides financing, insurance and other programs to help get riders on the road. www.harley-davidson.com.


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