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Is Harley-Davidson (HOG) Likely to Miss on Q3 Earnings?

Zacks Equity Research

Harley-Davidson, Inc. (HOG) is set to report third-quarter 2014 results on Oct 21. Last quarter, it posted a +11% surprise. Let us see how things are shaping up for this announcement.

Factors Affecting the Past Quarter

Harley-Davidson is expanding its product portfolio to increase its customer base. In Mar 2014, the company launched two bikes, namely the Low Rider and the SuperLow 1200T. The company has also started delivering the Street 750 and Street 500 bikes to wholesalers and retailers. These new motorcycles are expected to increase sales.

Harley-Davidson expects shipments to range between 49,000–54,000 motorcycles for the third quarter of 2014. In 2014, Harley-Davidson expects shipment of 270,000–275,000 motorcycles, up 3.5–5.5% over 2013.

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However, the operating income of Harley-Davidson Financial Services segment is expected to decline in 2014 due to higher credit losses and contracting net interest margins. It decreased 5.5% year over year in the first half of 2014.

Earnings Whispers?

Our proven model does not conclusively show that Harley-Davidson is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Most Accurate estimate stands at 62 cents while the Zacks Consensus Estimate is 60 cents. Hence, there is a difference of +3.3%.

Zacks Rank: Harley-Davidson’s Zacks Rank #4 (Sell) lowers the predictive power of ESP. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

American Axle & Manufacturing Holdings Inc. (AXL) has Earnings ESP of +4.6% and a Zacks Rank #3 (Hold). The company will report third-quarter 2014 earnings on Oct 31.

Meritor, Inc. (MTOR) has Earnings ESP of +37.5% and a Zacks Rank #3. It will release third-quarter earnings results on Nov 12.

Genuine Parts Company (GPC) has Earnings ESP of +0.8% and a Zacks Rank #2 (Buy). The company will post second-quarter earnings on Oct 20.

Read the Full Research Report on AXL
Read the Full Research Report on GPC
Read the Full Research Report on HOG
Read the Full Research Report on MTOR


Zacks Investment Research