How Will Harley-Davidson (HOG) Stock React To Latest Recall?

NEW YORK (TheStreet) -- Harley-Davidson (HOGis recalling over 3,000 motorcycles to fix an ignition switch issue that can cause the bikes to stall and crash, according to the U.S. National Highway Transportation Safety Administration, Reuters reports.

The company told NHTSA that excessive engine vibrations could trigger the issue, which it said affects 3,361 of its 2014 FXDL Dyna Low Rider motorcycles.

This is the second major recall Harley-Davidson has been forced to make this summer, its peak selling season, Reuters noted.

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Last week, the company lowered its full year forecast for motorcycle shipments, citing weaker-than-expected U.S. retail sales and a delay in getting its newest bikes into dealer showrooms.

Shares of Harley-Davidson are currently up 0.02% to $61.83

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

"We rate HARLEY-DAVIDSON INC (HOG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, notable return on equity 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 33.9% 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 ($3.78 versus $3.27).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Automobiles industry. The net income increased by 30.3% when compared to the same quarter one year prior, rising from $271.74 million to $354.15 million.
  • HOG's revenue growth trails the industry average of 21.5%. Since the same quarter one year prior, revenues rose by 11.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Automobiles industry and the overall market, HARLEY-DAVIDSON INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 44.51% 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, HOG's net profit margin of 17.70% significantly outperformed against the industry.
  • You can view the full analysis from the report here: HOG Ratings Report

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