What About Those Numbers?
For the full year margins expanded and EPS grew 16% from $2.33 to $2.72. The company also showed confidence in guiding higher with an expected 10% plus surge in shipping motorcycles in the first quarter of 2013 alone. Also the company announced it had bought back 6.5 million shares. Harley-Davidson, Inc. (NYSE:HOG) has been increasing the dividend, most recently with a 35% increase. At a 23% payout ratio it’s certainly sustainable. Corporate governance risks are low. Return on equity stands at 25.07% and the operating margin is 18.43%.
The main risks as stated in their last 10-K are employee benefits and pension payouts however the company was able to make a voluntary contribution to the pension fund of $175 million in 2012. Also at issue is total debt of $5.10 billion to $863.35 million in total cash. The company is working on this paying down over $600 million in debt in 2012.
Competition primarily consists of privately held Triumph, Viper Networks, Inc. (PINK:VPER), and Ultra Motorcycle companies. In many ways Harley-Davidson, Inc. (NYSE:HOG) most closely competes with Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM), both manufacturers of autos, another consumer discretionary sector.
GM is trading at a 9.60 P/E and at a market cap of $38.26 billion is triple the size of Harley-Davidson. Analysts expect a 16.28 % five year EPS growth rate (yoy) for GM and 15.53% for Harley-Davidson.
Ford is trading at a 9.12 P/E with a 3.20% yield and more than four times bigger than Harley-Davidson. At first glance one would think why not buy Ford instead? In one word, growth. Analysts predict only an 11% five year EPS growth rate for Ford. Ford and GM are both turnaround stories and so is Harley-Davidson but with a more extraordinary story in my opinion. Harley-Davidson averted liquidation in 1981 after 13 Harley executives bought the company back from AMF and then faced and overcame strong Japanese competition. Talk about insider conviction.
Riding Off Into The Sunset
Due to its strong brand loyalty and its efforts to claim new members to the Harley Owners Group and converts to the Harley lifestyle I think Harley-Davidson is a good name to buy on a pullback. Valuation is high with Goldman Sachs cutting the price target not on potential but on price as this has been a hot name over the last few years. But I think with these worldwide initiatives including the poignant Freedom jacket campaign Harley-Davidson can ride off into the global sunset without any worries.
The article HOGging The Global Limelight originally appeared on Fool.com and is written by AnnaLisa Kraft.
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