On October 24, 2024, Harley-Davidson Inc (HOG, Financial) released its 8-K filing detailing its third quarter financial results. The company, a leading global manufacturer of heavyweight motorcycles, reported earnings per share (EPS) of $0.91, surpassing the analyst estimate of $0.80. However, revenue fell short of expectations, coming in at $1,151 million compared to the estimated $1,265.78 million.
Company Background
Harley-Davidson Inc (HOG, Financial) is renowned for its heavyweight motorcycles, capturing approximately 38% of the domestic market in 2023. The company has expanded into the adventure touring market with its Pan America model and the electric segment with the LiveWire brand. Harley-Davidson Financial Services (HDFS) supports the business by providing financing and insurance services.
Performance and Challenges
Despite the positive EPS, Harley-Davidson faced significant challenges in the third quarter. Consolidated revenue decreased by 26% year-over-year, primarily due to a 32% decline in Harley-Davidson Motor Company (HDMC) revenue. The company cited high interest rates and macroeconomic uncertainties as key pressures on its core markets. Global retail sales also fell by 13%, with North American sales down 10%.
Financial Achievements
Harley-Davidson's financial services arm, HDFS, reported a 29% increase in operating income, driven by higher interest income and a lower provision for credit losses. This segment's resilience highlights the importance of diversified revenue streams in the Vehicles & Parts industry.
Income Statement Highlights
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Revenue | $1,151 million | $1,549 million | -26% |
| Operating Income | $106 million | $209 million | -49% |
| Net Income | $119 million | $199 million | -40% |
| Diluted EPS | $0.91 | $1.38 | -34% |
Analysis of Performance
The decline in HDMC revenue was largely due to a 39% drop in global motorcycle shipments as dealers adjusted inventory levels. Despite these challenges, Harley-Davidson maintained a gross margin of 30.1%, slightly down from 31.7% in the previous year. The company's focus on favorable net pricing and cost management helped mitigate some of the negative impacts.
Commentary
"We have worked diligently through the quarter to mitigate the impact of high interest rates, and macroeconomic and political uncertainty, that continue to put pressure on our industry and customers, especially in our core markets," said Jochen Zeitz, Chairman, President and CEO, Harley-Davidson.
Conclusion
While Harley-Davidson Inc (HOG, Financial) exceeded EPS expectations, the significant revenue decline underscores the challenges posed by the current economic environment. The company's ability to navigate these challenges while maintaining profitability will be crucial as it looks towards 2025. Investors and stakeholders will be keenly watching how Harley-Davidson adapts its strategies to sustain growth and market share in the coming quarters.
Explore the complete 8-K earnings release (here) from Harley-Davidson Inc for further details.
