Harley-Davidson Trading forecasts and signals

The market the day before. The session on May 19, the main American stock exchanges ended in the red zone. The S&P 500 dropped 0.75% to 4,901 points, the Dow Jones fell by the same amount, and the Nasdaq lost 0.26%. Of the 11 members of the S&P 500, eight closed in negative territory. Representatives of non-cyclical consumer goods (-1.98%) and high-tech companies (-1.07%) traded worse than the market.Company newsCisco Systems (CSCO: -13.7%) reported a decrease in revenue in the third fiscal quarter and a slowdown in the growth of the number of orders. The company noted supply chain problems due to quarantine in China.Patrick Frisk will step down as CEO and Board Member of Under Armour (UAA: -11.9%) on June 1. Colin Brown will be appointed Interim Executive Director.Harley-Davidson (HOG: -9.3%) suspends assembly and delivery of its products for two weeks due to problems with components from an unnamed supplier.We expectInflation in Japan in April, according to consensus, was 2.5%, exceeding 2% for the first time in 13 years. In the UK, the indicator reached a 40-maximum at 9%. The German producer price index rose by 33.5% YoY. The main reason for such a sharp increase was the rise in the cost of energy carriers and failures in their supply. The average price of oil since the beginning of the year was $100 per barrel against $63 in January-May 2021 (+60%). Coal prices rose from last year's $70 per ton to $262.Yields on two- and 10-year treasuries fell by 3 bps and 1 bps - to 2.61% and 2.85%, respectively. The indicator for 30-year securities decreased by 1 bps, to 3.07%.Trading on May 19 on the sites of Southeast Asia ended in the red. China's CSI 300 fell by 0.15%, Hong Kong's Hang Seng adjusted by 1.89%, Japan's Nikkei 225 lost 0.58%. EuroStoxx 50 has been growing by 1.30% since the opening of the session.Brent crude futures are quoted at $103.9 per barrel. Gold is trading at $1,861 per troy ounce.In our opinion, the S&P 500 will hold the upcoming session in the range of 3850-3900 points.MacrostatisticsThe number of unemployed in the United States in April increased by 218 thousand against the March growth of 197 thousand and with a consensus of 200 thousand.No important macro data is scheduled to be published today.Sentiment IndexThe sentiment index dropped to 33.Technical pictureThe S&P 500 is moving in a downtrend that began in early April. To date, the broad market index has lost more than 600 points. The continuation of the correction looks more likely than a rebound above 4000 points. The RSI indicator tends to the lower border of the channel, the MACD does not give additional signals.Quarterly reportsReporting on the results of the second quarter of the fiscal year this Friday will be presented by Deere & Co. (DE). The share of agricultural machinery in the company's revenue is 65%, the share of construction machinery is 26%, the share of leasing is 9%. Over the past five years, the revenue and EPS CAGR amounted to 10.5% and 31.6%, respectively. In the last two years, Deere's earnings per share have come out above expectations. High growth rates and strong financial results led to the fact that the company's shares rose from $120 in March 2020 to $430 in the same month of 2022. The transformation of the agro-industrial sector will further improve Deere's financial performance. Rising prices for grain crops stimulate an increase in their production worldwide. The food shortage, which was provoked by the conflict in Ukraine, will require new tools to optimize the ...

Harley-Davidson, an American motorcycle manufacturer and a truly iconic company, reported for the 2nd quarter of 2021.The reporting data was higher than analysts' expectations. The consensus forecast assumed an adjusted EPS of $1.18, in fact, the indicator was $1.41. The company also exceeded its revenue forecast, earning $1.53 billion. instead of the expected $1.39 billion.However, it was not possible to beat the forecasts of Harley-Davidson in all segments of its business. For example, it was expected that the revenue from the sale of motorcycles would be $1.11 billion, but in fact it turned out to be at the level of $1.03 billion. On the other hand, sales of spare parts brought in $0.223 billion against the forecast of $0.213 billion.  As a result, the total operating profit of the segment for the sale of motorcycles and related products amounted to $185.8 million. The financial services segment brought the company $95 billion in operating profit.Now the company is valued at $6.3 billion on the stock exchange. Here are its main multipliers:P/E — 13P/S — 1,4Net debt / EBITDA — 7,2EV/EBITDA — 15,6Compared to the lows of last year, the share price of Harley-Davidson has already doubled. But the shares reacted to the recent report with a fall of 7% and are now more than 20% below this year's highs reached in May.  Will the legendary Harley-Davidson have enough power to change the trajectory and continue the rally in the stock market?  Of course, against the background of the low base of last year, when the pandemic made its severe adjustments to business indicators, the company's current report looks very impressive.But if we compare the current results with the figures of 2019, the picture will not be so remarkable: the sales figures of Harley-Davidson are still lagging behind the levels of two years ago. Thus, in terms of revenue, the company lagged behind the level of the 2nd quarter of 2019 by 6%.However, according to some indicators, Harley-Davidson still bypassed pre-crisis levels. For example, the company's operating profit increased by 9% compared to the 2nd quarter of 2019, although this was mainly due to the financial services segment.  The level of delays over 30 days in retail trade was 2.2% compared to 3.3% in 2019. The actual losses on loans also decreased, but this is more likely due to the benefits provided to individuals in the United States as part of recent federal stimulus packages. In the future, these benefits will no longer have a positive effect on the indicators of the company's financial segment.  In addition, the company continues to experience problems in supply chains and logistics related to the pandemic. There is still uncertainty about the tariffs for the supply of motorcycles to the EU. Raising tariff rates in the future may put pressure on the company's operating margin.  The largest share in the volume of retail sales of Harley-Davidson is occupied by the United States (about 70%). The second largest market is Europe, which accounts for over 15%.  Harley-Davidson is gradually canceling discounts and raising prices for individual motorcycle models, while, according to the company's representatives, demand for its products remains high, but costs due to high raw material prices are also growing significantly.  DividendsBefore the pandemic, the company was sending about $1.5 per one share for dividends. Now for the first two quarters, shareholders will receive 30 cents. If this amount of payments is maintained, the annual dividend yield may reach 1.5% in the second half of the year.Read more: Dividends: what is it and how to get themPlans and forecasts  By the end of 2021, Harley-Davidson expects revenue growth of 30-35% y/y. If the forecast comes true, the company will return to the level of 2019 according to this indicator. It is predicted that capital expenditures this year will remain at the historical average level and will amount to $190-225 million.The issuer will also continue to adhere to the Hardwire strategy, which is focused on increasing the profitability of its business segments. One of the elements of this strategy is the development of the direction of electric bikes, which are produced under a separate brand LiveWire.  The company introduced the first electric bike of the LiveWire brand in 2019, and now a new and more affordable LiveWire One model has appeared in the brand's line. The new motorcycle will go on mass sale in the fall. In addition, Harley-Davidson plans to develop the production of electric bicycles under the “Serial 1” brand.According to forecasts, the global market of electric motorcycles will grow at a rate of more than 4% per year, and if its volume is now estimated at $30 billion, then by 2027 it can reach $40 billion dollars. This will be facilitated both by raising awareness of the world's population about the harm to the environment of internal combustion engines, and by active state participation in supporting the industry through benefits and subsidies.  In addition, Harley-Davidson's business growth points can be a platform for trading used motorcycles and the production of limited series of products with subsequent sale at special prices.Analysts' opinionHarley-Davidson's decision to separate the production of electric bikes into a separate direction with its own trademark can be assessed as a positive factor, since this segment does not fit into the general ideology of the Harley-Davidson brand.  Unfortunately, the company has no other breakthrough solutions that would allow it to significantly increase its production and financial indicators.  Problems with the introduction and possible increase in tariffs for the supply of Harley-Davidson products to Europe may negatively affect the profitability of the business.The company still has a high debt burden, and the development of new products and the creation of infrastructure for electric motorcycles requires significant investments.  Harley-Davidson shares have a lot of growth potential, while the risks of their fall are quite ...