On Monday, DA Davidson reaffirmed its Buy rating and $43.00 price target for Harley-Davidson (NYSE: NYSE:HOG). The firm's decision follows insights from dealers at a recent Harley-Davidson dealer event in Milwaukee and discussions at DA Davidson's Industrials conference.
Despite projecting third-quarter earnings below the consensus, with an estimate of $0.70 per share compared to the expected $0.86, the firm anticipates that Harley-Davidson will lower its full-year 2024 guidance. This adjustment is expected due to further destocking of U.S. dealer inventories in the fourth quarter of 2024.
The analyst from DA Davidson believes that the current valuation of Harley-Davidson is justified based on a sum-of-the-parts (SOTP) valuation method. This approach separates the company's Motorcycle and Related Products (HDMC) and Harley-Davidson Financial Services (HDFS) segments. The firm applies a 10.5 times price-to-earnings (P/E) multiple to the projected fiscal year 2025 earnings for HDMC and a 7.0 times P/E multiple for HDFS earnings.
The forecast for Harley-Davidson's third-quarter performance suggests a potential downward adjustment in the company's financial outlook. The analyst expects Harley-Davidson to revise its full-year 2024 guidance to account for the inventory changes that are predicted to occur in the last quarter.
Harley-Davidson is scheduled to release its third-quarter 2024 earnings soon, and the market will be watching to see if the company's results align with DA Davidson's projections. The firm's maintained Buy rating and price target indicate a continued positive outlook on the stock, despite the anticipated earnings shortfall for the quarter.
In other recent news, Harley-Davidson's financial performance and strategic moves have led to adjustments in stock targets by several analyst firms. Baird downgraded Harley-Davidson's stock from Outperform to Neutral, citing concerns about retail performance and inventory.
Despite this, the firm acknowledged the intrinsic value of the Harley-Davidson brand. On the other hand, Citi and UBS lifted their stock targets for Harley-Davidson, reflecting renewed optimism and anticipated benefits from the company's recent initiatives.
Harley-Davidson reported a Q2 profit surpassing Wall Street expectations, largely driven by robust sales of its high-end Touring motorcycles. However, the company revised its 2024 revenue outlook, indicating potential demand downturns and plans for more significant production cuts later this year. Furthermore, the company declared a Q3 dividend of $0.1725 per share, reflecting its financial health and commitment to shareholder returns.
In terms of strategic initiatives, Harley-Davidson announced a $1 billion share repurchase plan and a shift in production to Thailand. The company is also set to receive an $89 million grant from the Biden administration to expand its Pennsylvania plant for manufacturing electric motorcycles, as part of a $1.1 billion initiative for electric vehicle production.
InvestingPro Insights
To complement DA Davidson's analysis, recent data from InvestingPro offers additional context on Harley-Davidson's financial position. The company's P/E ratio of 7.08 and adjusted P/E ratio of 6.74 for the last twelve months as of Q2 2024 suggest that the stock is trading at a relatively low earnings multiple, which aligns with DA Davidson's valuation perspective.
InvestingPro Tips highlight that Harley-Davidson has maintained dividend payments for 32 consecutive years and has raised its dividend for 3 consecutive years. This demonstrates the company's commitment to shareholder returns, even as it navigates inventory challenges. The current dividend yield stands at 1.98%, which may appeal to income-focused investors.
It's worth noting that Harley-Davidson's stock has taken a significant hit over the last week, with a 1-week price total return of -9.73%. This recent dip could present an opportunity for investors who agree with DA Davidson's bullish outlook. However, potential investors should be aware that 3 analysts have revised their earnings downwards for the upcoming period, which may reflect the inventory destocking concerns mentioned in the article.
For those seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into Harley-Davidson's financial health and market position.
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