Why Harley-Davidson (HOG) Stock Is Up Today

NEW YORK (TheStreet) -- Harley-Davidson (HOG) was gaining 7.2% to $72.50 in premarket trading Tuesday after posting a higher-than-expected profit for the first quarter.

For the first quarter the motorcycle maker reported earnings of $1.21 a share, beating estimates of $1.08 a share by 13 cents. Revenue grew 22.7% from the year-ago quarter to $1.73 billion. Analysts surveyed by Thomson Reuters expected revenue of $1.53 billion.

The company said it sold 57,415 new motorcycles in the first quarter, a 5.8% increase from the year-ago period. Sales increased by 3% to 35,370 in the U.S. in the quarter.

Looking to the rest of 2014 Harley-Davidson maintained is forecast of 279,000 to 284,000 motorcycles shipped by the end of the year.

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TheStreet Ratings team rates HARLEY-DAVIDSON INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate HARLEY-DAVIDSON INC (HOG) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, good cash flow from operations, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • HARLEY-DAVIDSON INC has improved earnings per share by 9.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HARLEY-DAVIDSON INC increased its bottom line by earning $3.27 versus $2.71 in the prior year. This year, the market expects an improvement in earnings ($3.89 versus $3.27).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.3%. Since the same quarter one year prior, revenues slightly increased by 1.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has significantly increased by 70.85% to $151.99 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 31.66%.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 28.89% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • 44.30% is the gross profit margin for HARLEY-DAVIDSON INC which we consider to be strong. Regardless of HOG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.33% trails the industry average.
  • You can view the full analysis from the report here: HOG Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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