HOG - Up 36% in 2021 is Harley-Davidson Still a Buy?

Iconic motorcycle manufacturer Harley-Davidson, Inc. (HOG) reported solid financials in its recently released report for the first quarter, ended March 31, 2021. While its revenue from its motorcycles segment increased 13% year-over-year to $1.02 billion for the quarter, its revenue from its parts and accessories business  increased 11.3% year-over-year to $149.86 million. Its net income came in at $259.14 million, up 271.8% year-over-year, and its non-GAAP EPS increased 273.3% year-over-year to $1.68.The stock is up 11.5% since reporting the results on April 19. HOG closed yesterday’s trading session at $49.92 after hitting its $50.15 52-week high.

Regarding a tariff rate hike by the European Union, the HOG  released a statement on April 19  confirming that it will  challenge the decision on the grounds that it is at odds with the notion of free trade and will create a  competitive disadvantage for HOG’s products  versus its European competitors’. The news had little  impact on investors’ optimism about  the stock.

Click here to check out our Automotive Industry Report for 2021

So, here are the factors that we think could influence HOG’s performance in the coming months:

The Hardware Five-Year Strategic Plan

HOG released its five-year strategic plan—The Hardware—on February 2.Among other strategic priorities, the company aims to strengthen and grow its leadership position in its strongest motorcycle segments, and selectively focus on opportunities in profitable segments. For example, its first adventure touring motorcycle, Pan America, affirms the company's selective expansion into a high-potential segment that is one of the largest in many European markets and has untapped potential in the U.S. also.

HOG  also seeks  to lead in the electric motorcycles space. In fact, HOG’s LiveWire electric motorcycle, which it began selling in 2019, is widely regarded as the world’s leading electric motorcycle.  The company wants to expand its position in this space and is creating a separate division dedicated  to electric motorcycles.

Launch of New Collection Along with Sale of Used Bikes

On April 26, HOG announced its new Icons Collection, which will deliver  one or two models annually with a single production run for each motorcycle model. HOG said  the production of that model will never be resumed or repeated. The collection is expected to debut with the introduction of the Electra Glide Revival model. In February, HOG   launched its all-new Pan America 1250 adventure motorcycle. Furthermore,   to reach out to younger customers, the company announced plans last month  to roll out a certified pre-owned bike program, dubbed  H-D Certified, which is expected to generate solid revenues.

Favorable Revenue and EPS estimates

Analysts expect the company’s revenue to increase 73.4% for the current quarter ending June 30, and 34.3% in 2021. Its EPS is expected to increase 290% year-over-year to $1.14 in the current quarter.  HOG’s EPS is expected to increase at a rate of 43.1% per annum over the next five years.

POWR Ratings Reflect Favorable Prospects

HOG has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. HOG has a B grade for Growth, which is consistent with analysts’ expectations that its revenue and EPS will increase in the coming quarters.

It has a B grade for Momentum also, which is in sync with its 21.6% returns over the past three months and 37.1% gains over the past month.

The stock also has a B grade for Quality. This is justified given  its 23.7% trailing-12-month levered free cash flow margin, which is significantly higher than the 7.2% industry average.

Click here to see HOG’s POWR ratings for Value, Sentiment, and Stability.

HOG is ranked #21 of 53 stocks in the B-rated Auto & Vehicle Manufacturers industry.

If you’re looking for other top-rated stocks in the Auto & Vehicle Manufacturers industry, with an Overall POWR Rating of A or B, you can access them here.

Bottom Line

HOG’s stock has been on an uptrend  since the company reported stellar earnings results on April 19. It is currently trading above its 50-day and 200-day moving averages of $40.12 and $37.17, respectively. Investors’ interest has been growing in the stock because the company has been launching new collections and is also making significant progress in its electric motorcycle segment. So, we think it could be wise to bet on the stock now.

Click here to check out our Automotive Industry Report for 2021

HOG shares were trading at $50.17 per share on Thursday morning, up $0.25 (+0.50%). Year-to-date, HOG has gained 37.28%, versus a 12.72% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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