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Harley-Davidson is slated to report its Q1 2022 results on Wednesday, April 27. We estimate that Harley’s revenue will come in at about $1.5 billion for the quarter, rising by about 5.5% versus last year and ahead of consensus estimates. We project that earnings will stand at close to $1.45 per share, roughly in line with the consensus estimates, although this would mark a decline from earnings of $1.68 per share seen in Q1 2021. So what are some of the trends that are likely to drive Harley’s results?

Harley’s revenue growth for the quarter will be driven by stronger motorcycle unit sales. While automotive companies, in general, are facing some pressure on the cost side, amid supply-chain headwinds and rising inflation, we expect Harley to navigate the issues reasonably well. Harley expects the motorcycle segment’s operating margins to actually come in stronger for 2022, with guidance standing at 11% to 12% for the year, up from around 9% in 2021. For instance, Harley is focusing on more premium motorcycles while stopping the development of lower margin vehicles, and the company is also expected to see stronger growth in its margin accretive parts and accessories and apparel businesses. However, Harley has guided for lower operating income for its financial services division, as the favorable allowance releases and lower credit losses that were seen in 2021 are unlikely to repeat. See our interactive dashboard analysis on Harley-Davidson Earnings Preview for more details on how Harley’s revenues and earnings are likely to trend for the quarter.

Harley stock has outperformed the broader market this year, remaining roughly flat since early January 2022, compared to the S&P 500, which remains down by around 7%. However, we think that Harley stock looks compelling at current levels of about $38 per share, considering that it trades at just 9x projected 2022 earnings and about 8x projected 2023 earnings. Moreover, although the company saw flat to negative growth over the last several years, we expect Harley to grow revenue by over 10% in 2022 and by around 7% in 2023. The company is also targeting low double-digit EPS growth through 2025, under its five-year “Hardwire” strategic plan. Harley is also increasingly betting on the electric bike space, via its LiveWire electric motorcycle business. While LiveWire is expected to be spun off into a separate publicly listed company via a SPAC deal sometime this year, it will still be majority-owned by Harley. This could also have an overall positive impact on the company’s valuation.

We value HOG stock at about $54 per share, about 40% ahead of the current market price. See our analysis on Harley- Davidson Valuation: Expensive or Cheap for more details. Also, check out our analysis of Harley-Davidson Revenue for more information on the company’s key revenue streams and how they are trending.

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Source: Forbes

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