All Set – This One is Ready to Go
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
A company which continues to register impressive results is always noteworthy. A prudent investor should always look for an opportunity where a rock solid company rebounds from a difficult situation. This is in fact the best time to buy in, since it maximizes one’s gains. I believe just such an opportunity is waiting for investors in the months to come.
Harley-Davidson (NYSE: HOG), a motorcycle manufacturer, is finally set to rule the market with its new launches and a well planned Enterprise Resource Planning (ERP) system in place. It recently posted its third quarter results, which were ahead of estimates on the bottom line. A promising fact about the news was the company’s adherence to its previously announced guidance, in spite of difficulties faced during the period.
A Snapshot of the Quarter…
Due to low supply, revenue plunged to $1.09 billion, a fall of 11% over last year. Because of implementation of the ERP production system in its biggest facility in Pennsylvania, the motorcycle manufacturer’s production was hampered. However, demand for its bikes continued to rise, which was evident from the sales increase of 7.6% in the international segment.
Another pushback was due to delay in the rollout of its launch of new products, which was expected to hit the market during the third quarter.
Harley faces stiff competition from its rival Polaris Industries (NYSE: PII), which is gaining market share at a fast pace. Its acquisition of Victory and Indian has enabled Polaris to attain a strong presence in the heavyweight motorcycle market. This can be a potential threat to Harley-Davidson in its main market segment. Also, Polaris posted a stellar quarter a week ago, with a 40% jump in earnings due to strong demand and higher prices.
The stock price performance of the industry players over the last five years depicts Harley’s performance over its peers Polaris and Arctic Cat (NASDAQ: ACAT):
Though Polaris’ stock price has appreciated more compared to Harley, the latter has also performed well. Appreciation of 139% in the last five years shows the effects of Harley’s efforts to control costs and gain production efficiencies. These benefits are yet to be realized fully and will further boost its performance. Moreover, Harley has outperformed Arctic Cat, which is a strong player in the snowmobiles and all-terrain vehicles markets.
However, Arctic Cat is also making efforts to match up to its peers. It has recently launched recreational off-highway vehicles, which is attracting buyers. The same was highlighted in its recent quarter, which registered a revenue growth of 12% due to huge demand for its new offerings.
Future Looks Bright
Though Harley faced a number of setbacks during the period, it is all set for a great future. It has a number of new models coming up that are expected to lure customers galore. The new launches are based on innovation and will cater to the younger generation. Young customers have become an important part of Harley’s universe. This market now comprises 30% of the total sales, and innovating on this front will help the company gain larger market share.
Additionally, the implementation of the ERP system will beget huge benefits. It will make the production system efficient and will save costs. Also, the company has increased its prices, which will help the top line grow.
The company is also intending to grow its international presence, which can prove to be fruitful in the long term since the motorcycle manufacturer is already witnessing great growth from its international segment.
The Bottom Line
It seems that after small hiccups from lower productions the company is set to pick up speed in the future. The restructuring plan has made the company stronger than before with better cost management and wider margins. Moreover, Harley-Davidson kept the guidance unchanged, which highlights its faith for a great holiday season and wider product portfolio. With everything in place, this company will strengthen any investor’s portfolio. I don’t mind keeping an eye on the stock.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of Arctic Cat and Polaris Industries. Motley Fool newsletter services recommend Polaris Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.