Stock Story -
American motorcycle manufacturing company Harley-Davidson (NYSE:HOG) reported Q2 CY2024 results topping analysts' expectations, with revenue up 12% year on year to $1.62 billion. It made a GAAP profit of $1.63 per share, improving from its profit of $1.22 per share in the same quarter last year.
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Harley-Davidson (HOG) Q2 CY2024 Highlights:
- Revenue: $1.62 billion vs analyst estimates of $1.27 billion (27.2% beat)
- EPS: $1.63 vs analyst estimates of $1.38 (18% beat)
- Gross Margin (GAAP): 26.8%, down from 32.6% in the same quarter last year
- Free Cash Flow of $432.2 million, up from $57.64 million in the previous quarter
- Motorcycles Sold: 49,700, up 6,766 year on year
- Market Capitalization: $4.56 billion
Leisure ProductsLeisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Over the last five years, Harley-Davidson grew its sales at a weak 1.7% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Harley-Davidson's annualized revenue growth of 5.5% over the last two years is above its five-year trend, but we were still disappointed by the results.
We can better understand the company's revenue dynamics by analyzing its number of motorcycles sold, which reached 49,700 in the latest quarter. Over the last two years, Harley-Davidson's motorcycles sold averaged 1.8% year-on-year growth. Because this number is lower than its revenue growth during the same period, we can see the company's monetization has risen.
This quarter, Harley-Davidson reported robust year-on-year revenue growth of 12%, and its $1.62 billion of revenue exceeded Wall Street's estimates by 27.2%. Looking ahead, Wall Street expects revenue to decline 21.5% over the next 12 months, a deceleration from this quarter.
Cash Is King Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Harley-Davidson has shown decent cash profitability, giving it some flexibility to reinvest. The company's free cash flow margin averaged 10.4% over the last two years, slightly better than the broader consumer discretionary sector.
Harley-Davidson's free cash flow clocked in at $432.2 million in Q2, equivalent to a 26.7% margin. This quarter's result was good as its margin was 4.4 percentage points higher than in the same quarter last year, but we wouldn't put too much weight on it because working capital and capital expenditure needs can be seasonal, causing quarter-to-quarter swings. Long-term trends carry greater meaning.
Key Takeaways from Harley-Davidson's Q2 Results We liked that Harley-Davidson beat analysts' revenue and EPS expectations this quarter. Zooming out, we think this was a solid quarter. The stock traded up 4.2% to $35.30 immediately following the results.
