Five Things to Watch in HOG Earnings Tomorrow

Retail Sales – I’m starting with retail sales rather than shipments because the better indicator of this year’s HOG performance is going to come from what’s happening at retail versus what HOG can ship. The retail sales trend for HOG has been robust the last three years with YOY growth in cycle sales. With news of slower sales at retail from both UBS and Baird, this is the number that should be the most closely followed. Any number below 71,000 should be considered a bad sign and would break at least a 3 year trend in growth of retail sales. Any number above 74,500 should be considered positive leading into the summer sales season.

Estimate: 71,000 – 73,000

Figure 1 - Harley Retail Sales over last 3 years

A/R Growth – One number I talked about in my last article was HOG A/R growth, more specifically the A/R days growth. Slower payment by Harley dealers (more cycle shipments, not as fast sales, cycles sitting on the lot longer) has signaled more inventory on the lot. This number has grown every quarter since Q2 – 2004. With lower shipments this quarter this trend should break. Any number inline with last year's 100 days is not a good sign.

Estimate: 95 days

Inventory Work-Off – Harley has stated that they would like to work-off approximately 10,000 cycles in dealer inventory. Any number below 2,000 should worry investors.

Estimate: 4,000 – 6,000

Shipments – Harley has already provided shipment estimates of between 64,000 and 66,000. This quarter will be about how far they were able to push the York plant once it came back online after the earlier strike. The lower the shipment the number, the more difficult it will be to make up the rest of the year. I suspect a surprise with more shipments then previously forecasted by HOG.

Estimate: 67,000 – 70,000

Special Charges and Expenses Related to Lending – If indeed a bad quarter occurs as I predict then the possibility of seeing an earnings bath taken grows exponentially. Given higher delinquency rates related to its loan pool, I could see an additional charge taken to against earnings and put into either reserve or paid out directly to protect the company against future loan portfolio defaults.