Harley-Davidson (HOG) Raises Motorcycle Rev Guidance 44%, PT Raised to $65 at BofA Securities

BofA Securities analyst Robert Ohmes raised the price target on Harley-Davidson (NYSE: HOG) to $65.00 (from $55.00) after the company reported 1Q21 adj. EPS of $1.68 (vs. expectations for 0.95) as U.S. Retail unit sales increased 30.6% y/y (+10.3% vs. 1Q19), driven by strong demand for higher margin Touring Motorcycles. HOG also raised its 2021 Motorcycle revenue segment guidance to 30-35% (from 20-25%) & Financial Services (HDFS) segment EBIT guidance to +50-60% growth (was +10-15%) as HDFS EBIT in 1Q increased 417.0% (vs. our 114.7%) driven by a favorable adjustment to the provision for credit losses.

The analyst maintained a Buy rating, stating "We believe 1Q likely represents peak gross margins given: (1) expected GM mix headwinds in 2Q with the launch into Adventure Touring which has a lower margin profile compared to Touring/Cruisers; and (2) less volume benefits in 3Q/4Q given HOG’s model launch timing shift into 1Q this year as HOG’s Motorcycles op. margin is forecast to decline from ~+mid-teens in 1H21 to a breakeven range in 2H21 that we believe will include a significant loss in 4Q21 (similar to 4Q20). Still, we raise our F21 adj. EPS (excl. tariffs) to $3.35 (from $2.45) to include our significantly raised expectations for 2Q motorcycle revenue to be in line with HOG guidance for 30-35% F21 growth (vs. prior 20-25%) as well as the stronger HDFS outlook for this year."

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