Yahoo Finance Why Analysts Expect Disappointing 2016 Revenues for Harley-Davidson
Will Harley-Davidson’s 1Q16 Earnings Meet Analysts’ Estimates?
Harley’s revenue estimates
Analysts are estimating Harley-Davidson’s (HOG) revenues to be $1.5 billion in 1Q16. That’s 10.5% lower than the corresponding quarter of last year. Likewise, analysts estimate the company’s 2016 revenues will decline $5.3 billion, about 11% lower than the previous year.
Although the company’s recent performance in the US market has been good, its revenues have been hurt by the rising US dollar and falling shipments outside the US market. In this article, we’ll take a look at some factors that may drive Harley-Davidson’s revenues in 2016.
Along with analysts’ recommendations, it’s also important for investors to pay attention to revenue estimates, as they may reflect market expectations from the company. These estimates can also serve as a proxy for what might be priced into the market.
Currency headwinds
The United States is the key market for Harley-Davidson motorcycles. In 2015, the US market alone accounted for 71% of the company’s total automotive revenues. However, in the past two decades, Harley’s revenues from international shipments have increased. As in 2015, the company made its remaining 29% of automotive segment revenues from outside the US, which exposes Harley-Davidson to currency fluctuation risk.
In the last two years, currencies such as the euro, the Brazilian real, and the Japanese yen have depreciated significantly against the US dollar. Last year, currency headwinds took nearly 4.4% of the company’s total revenues and also resulted in an unfavorable impact on Harley-Davidson’s profitability in overseas markets.
Notably, Japanese automaker Honda (HMC), which is also a big player in the motorcycle segment benefited by weakening Japanese yen in recent quarters. Other mainstream US automakers (XLY) like General Motors (GM) and Ford (F) also had to face the heat of the strengthening US dollar.
Revenues from international markets
In 2015, the company shipped ~95,000 motorcycles outside the US. Currently, Australia, Mexico, Japan, and Canada are some of the other key markets for Harley-Davidson motorcycles. In these markets, the company is facing stiff competition from other automakers, especially from Japanese motorcycle manufacturers. This affects the company’s pricing strategy in these markets, leading to declining revenues and margins.
Continue to the next article to read about Harley-Davidson’s margins estimates.
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