Harley-Davidson shares continue to trade in a bull market despite weak Q4 results

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Mar 19, 2021
  • Total revenue has decreased 39.3% in Q4
  • On a full-year basis, total revenue was down 24%
  • Harley-Davidson named Ryan Morrissey as chief electric vehicle officer

Harley-Davidson (NYSE: HOG) shares have been moving in an uptrend last several months, and according to technical analysis, a positive trend remains intact. Harley-Davidson declared a $0.15/share quarterly dividend even though the Covid-19 pandemic impacts its business.

Fundamental analysis: The impacts of pandemic primarily drove the negative operating margin in 2020

Harley-Davidson is an American motorcycle manufacturer founded in 1903 that has survived numerous ownership arrangements, periods of poor economic health, and intense competition. Harley-Davidson shares have found strong support above $30, but the Covid-19 pandemic also impacts its business.

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Harley-Davidson reported Q4 results last month; total revenue has decreased by -39.3% Y/Y to $530.96M while Q4 GAAP EPS was -$0.63 (misses by $0.75). Total revenue has decreased above expectations, while the fourth-quarter results were also impacted by $44 million of restructuring costs.

On a full-year basis, total revenue was down 24%, while a net income was only $1.3 million for the 2020 fiscal year. Despite this, the board of directors decided to declare a $0.15/quarterly share dividend, representing a 650% increase from the prior dividend of $0.02.

According to the management, Harley-Davidson protected liquidity and achieved significant cash savings in the challenging 2020 year. The management expects to achieve cash savings of approximately $150 million this year.

“The negative operating margin in 2020 was primarily driven by the impacts of COVID and the restructuring actions and costs incurred as part of the Rewire. As we look forward, we believe our steady margin growth will be fueled by a focus on our most profitable motorcycle categories, optimization across our operations, outsized growth of our complementary businesses, and maintaining a lean SG&A cost structure,” said Gina Goetter, Chief Financial Officer of Harley-Davidson.

This March, Harley-Davidson named Ryan Morrissey as chief electric vehicle officer, who will start from April 01. “Ryan has extensive experience with leading OEMs, working on building businesses to develop, commercialize and support electric vehicles,” said Jochen Zeitz, chairman, president, and CEO.

Harley-Davidson shares could advance again above the $40 resistance level, but my opinion is that there are certainly better long-term investment opportunities at the moment.

Technical analysis: $40 represents a strong resistance level

Data source: tradingview.com

Harley-Davidson shares have weakened from their recent highs above $43 registered in January, and the current price stands around $35. The critical support levels are $30 and $25; $40 and $45 represent the important resistance levels.

If the price jumps above $40, it would be a signal to trade shares, and the next target could be around $43, but if the price falls below the $30 support level, it would be a firm “sell” signal.

Summary

Harley-Davidson is a stable company with a good position on the market, but there are certainly better investment opportunities at the moment. Harley-Davidson shares have found strong support above $30, but the Covid-19 pandemic also impacts its business.

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