This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Harley-Davidson Is a Buy Ahead of Second Quarter Report in July

Stocks in this article: HOG C

NEW YORK (TheStreet) -- As more and more consumers switch to electric vehicles from gasoline powered vehicles, Harley-Davidson  (HOG - Get Report) plans on getting into the action. Last Thursday, Harley announced Project LiveWire, the company's' first electric motorcycle that is able to go 0 to 60 miles per hour in 4 seconds.

Although the electric motorcycle won't be for sale anytime soon, the seller of 260,471 motorcycles in 2013 could steal sizable market share in the full size electric motorcycle market share (5,000 total projected in 2014) upon entering the market.

The motorcycle maker beat analysts' first quarter earnings estimates by 12% on April 22, posting $1.21 per share vs. the $1.08 consensus estimate. Revenue came in 3% above what Wall Street was expecting at $1.57 billion. Over the last 10 quarters, Harley has only missed its earnings estimates on one occasion. Second quarter earnings are expected to be released late next month. The stock has moved higher after earnings on four out of the last seven reports (up 6.41% after the strong first quarter report).

Harley trades at a price-to-earnings ratio of 15.58 times (2015 estimates) which is relatively cheap when factoring in the expected 16% EPS growth (PEG ratio of 0.97 times). Revenue growth will remain consistent next year at 8.2% (10.1% this year). The company continues to be shareholder friendly with a 31% dividend increase back in February, bringing the quarterly payout to 27.5 cents per share from 21 cents per share. They also authorized a buyback of an additional 20 million shares on top of the remaining 8.6 million shares left from a pre-existing buyback program. The combination of these could reduce total share count by more than 10% (currently 218.4 million shares outstanding).

The average analyst on Wall Street sees nearly 10% upside in the stock from currently levels with a median price target of $78. In its latest rating, April 24, Citigroup (C) maintained a buy rating and an $85 price target, making it the highest on the street.

Option Traders Bet on a Strong Second Quarter Report

On the same day as the electric motorcycle announcement, more than 13,000 August $75 calls traded with the majority being purchased for 98 cents to $1.20 each. The call to put ratio was 10:1. Call activity was 29 times the average daily volume. This unusual and bullish options activity sent implied volatility up 12.6% to 21.73. Open interest in the August $75 calls jumped to 10,629 contracts the next day from 2,112 contracts.

Given that the large call buyer has a breakeven point of $76-plus ($75 strike price + the premium paid for the calls) he/she is anticipating a rally of more than 6% in the next two months. Aside from the Project LiveWire announcement which could take a year or more to until translating to sales, second quarter earnings is the only major catalyst in the near-term.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs