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Harley-Davidson (HOG): Will its Earnings Disappoint in Q4? - Analyst Blog

Zacks Equity Research
Updated

Harley-Davidson, Inc. (HOG) is set to report fourth-quarter 2014 results on Jan 29. In the last quarter, it had posted a positive earnings surprise of 15%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Harley-Davidson’s motorcycle shipments are increasing over time. For 2014, Harley-Davidson expects shipments of 270,000–275,000 motorcycles, up 3.5–5.5% over 2013. In the fourth quarter of 2014, the company expects shipments to range between 46,500–51,500 motorcycles compared to 46,618 motorcycles shipped in the year ago quarter.

However, Harley-Davidson faces challenges due to product recalls, which increase its selling, general and administrative expenses. Moreover, frequent recalls can affect consumer confidence in the products and investor confidence in the stock. Also, Harley-Davidson’s products only cater to premium consumers. Lower consumer purchasing power in the current economic environment adversely affects the company.

Earnings Whispers

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

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Harley-Davidson’s Earnings ESP is 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 33 cents.

Zacks Rank: Harley-Davidson carries a Zacks Rank #3 (Hold). Though a Zacks Rank #3 increases the predictive power of ESP,  an ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

O'Reilly Automotive Inc. (ORLY) has an Earnings ESP of +2.40% and a Zacks Rank #2 (Buy). The company will report its fourth-quarter 2014 results on Feb 4.

Lear Corp. (LEA) has an Earnings ESP of +1.46% and a Zacks Rank #3. The company’s fourth-quarter financial results are scheduled for release on Jan 30.

AutoNation Inc. (AN) has an Earnings ESP of +1.10% and a Zacks Rank #3. It will release its fourth-quarter earnings results on Feb 3.


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O REILLY AUTO (ORLY): Free Stock Analysis Report
 
AUTONATION INC (AN): Free Stock Analysis Report
 
HARLEY-DAVIDSON (HOG): Free Stock Analysis Report
 
LEAR CORPORATN (LEA): Free Stock Analysis Report
 
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Zacks Investment Research