On Tuesday, the Milwaukee-based motorcycle company posted lower quarterly earnings, reduced its profit guidance and announced job cuts, Reuters reported.
"We expect a heightened competitive environment to continue for the foreseeable future, and now is the time for us to dial things up with significant additional investments in marketing and product development," said Matt Levatich, president and CEO of Harley-Davidson, in a statement on Tuesday.
BMO Capitals' downgrade follows the company's plan to take "demand-driving actions" to improve products.
This signaled that the issues Harley-Davidson faces are more than just cyclical or temporary, the firm said.
It is "looking like a long ride" for the company, the firm added.
"After 2015's underperformance in the motorcycle market it is apparent that the company needs to 'up its game' and develop more compelling products with better quality," according to BMO Capital Markets. "But the changes described by management are a multiyear process; new motorcycles are not developed overnight."
Analysts also reduced Harley-Davidson's fiscal 2016 EPS estimates to $4.15 from $5.02.
Shares of Harley-Davidson were down by 0.70% to $47.91 in early-morning trading on Wednesday.
Separately, 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 notable return on equity, expanding profit margins, good cash flow from operations and attractive valuation levels. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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.
- 47.60% is the gross profit margin for HARLEY-DAVIDSON INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.43% is above that of the industry average.
- Net operating cash flow has increased to $439.24 million or 19.68% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.48%.
- HARLEY-DAVIDSON INC's earnings per share declined by 11.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HARLEY-DAVIDSON INC increased its bottom line by earning $3.87 versus $3.27 in the prior year. This year, the market expects an improvement in earnings ($4.01 versus $3.87).
- HOG, with its decline in revenue, slightly underperformed the industry average of 7.3%. Since the same quarter one year prior, revenues slightly dropped by 8.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: HOG