Harley Davidson: Time for Wilbur the HOG to visit the bacon factory

How Charlotte the Analyst Quietly Saved

Wilbur the HOG from the Bacon Factory

For fiscal year 2010, the consensus estimate among experts was $.99 on a $36+ stock. Ninety days ago the estimate was for HOG to earn $1.26 and a mere 7 days ago the estimate was reduced to $1.05. Typical analyst games continue as the annual earnings estimate was reduced to $.99 during the past 7 days. During this 90 day period, consensus earnings estimates were reduced 21% while the stock price launched 18%.

Harley Davidson Earnings Press Release

MILWAUKEE, Jan. 25, 2011 -- Harley-Davidson, Inc. (NYSE: HOG) reported full-year 2010 income from continuing operations of $259.7 million, or $1.11 per share, compared to income of $70.6 million, or $0.30 per share, from continuing operations in 2009. For the fourth quarter of 2010, Harley-Davidson recorded a loss from continuing operations of $42.1 million, or $0.18 per share, which includes the impact of a one-time, $85.2 million charge from the Company's early repurchase of senior unsecured notes during the quarter.

The Company's financial services unit, Harley-Davidson Financial Services, was a key contributor to 2010 earnings, with operating income from financial services of $181.9 million for the full year, including $43.5 million in the fourth quarter. Operating income from motorcycles and related products was $378.8 million for the full year, including an operating loss of $6.8 million in the fourth quarter. VG: HOG's financial unit represented 32% of total operating income.

Full Year: For the full year 2010:

•  worldwide retail sales of Harley-Davidson motorcycles decreased 8.5 percent compared to 2009.
•  U.S. retail sales of Harley-Davidson motorcycles decreased 11.7 percent for the full year,
• while the U.S. heavyweight market segment was down 14.6 percent, compared to 2009.
• In international markets, retail sales of new Harley-Davidson motorcycles decreased 1.9 percent for the full year compared to 2009.
• For the full year, dealers sold 222,110 new Harley-Davidson motorcycles worldwide at retail, including 143,391 in the U.S.

Gross margin was 29.6 percent in the fourth quarter, compared to 20.3 percent in the year-ago period. Fourth-quarter 2010 gross margin benefited from favorability on product mix and foreign currency, while fourth-quarter 2009 gross margin was adversely affected by higher fixed costs spread over fewer units and the impact of exiting the Buell product line. The Company had an operating loss in the fourth quarter from motorcycles and related products of $6.8 million compared to an operating loss of $221.8 million in the year-ago period.

Full Year: In 2010, the Company shipped 210,494 Harley-Davidson motorcycles, in line with its target range of 207,000 to 212,000 motorcycles. Full-year 2010 shipments were 5.6 percent lower than 2009, when the Company shipped 223,023 units.

Revenue from Harley-Davidson motorcycles for the full year was $3.14 billion, a 1.2 percent decrease compared to 2009. Full year P and  A revenue was $749.2 million, a 2.4 percent decrease from the year-ago period. General Merchandise revenue was $259.1 million, an 8.2 percent decrease compared to 2009. Gross margin for the full year 2010 was 34.2 percent and operating margin was 9.1 percent, compared to 32.3 percent and 7.3 percent respectively in 2009.

Financial Services Segment

Fourth Quarter: The financial services segment recorded operating income of $43.5 million in the quarter, compared to an operating loss of $7.1 million in the year-ago quarter. The improvement in year-over-year operating income is largely the result of higher net interest income and lower provision for credit losses. Full Year: For the full year 2010, operating income from financial services was $181.9 million, compared to an operating loss of $118.0 million in 2009. Full-year 2009 results were affected by two non-recurring, non-cash charges totaling $101.1 million.

Guidance

In 2011, the Company expects to ship 221,000 to 228,000 Harley-Davidson motorcycles to dealers and distributors worldwide, an approximate five percent to eight percent increase compared to 2010. The Company expects to ship more motorcycles to U.S. dealers than it anticipates dealers will sell at retail in 2011, to return aggregate U.S. dealer inventory to what the Company believes is an appropriate level. In the first quarter of 2011, Harley-Davidson expects to ship 51,000 to 56,000 motorcycles. VG: Company neglects to specifiy the number of HOG's deemed inventory stuffing.