By Richard Robinson, Ph.D., Equities Analyst
Just last quarter, the U.S. Dollar Index rose about 10% against most foreign currencies… and the effect on revenue estimates is readily apparent.
Analysts now expect to see a decline of 3.3% for the current quarter instead of the 2.6% decline predicted at the end of last month.
Investors, meanwhile, are understandably concerned for the future of American companies.
Just recently, the greenback left one U.S. company to be devoured by foreign competition… or so it appears.
Free Reports:
Get Our Free Metatrader 4 Indicators - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter
Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
Competitors Circle Around
Due to the crippling effect of the strong dollar, Harley-Davidson (HOG) has become an easy target for its foreign rivals.
On Tuesday, the company announced its lower forecast for worldwide shipment. Management now expects to ship between 83,000 and 88,000 units in the second quarter, a 4.5% to 10% reduction from 2014 production.
HOG shares dove more than 9.7% on the news. As of Tuesday’s close, shares sit perilously close to their 52-week low of $54.22, which was reached on October 15, 2014.
And now, Harley’s competitors are zeroing in. You see, they’ve capitalized on the stronger dollar by cutting into Harley’s domestic sales with lower prices for their own bikes.
The stronger dollar makes this easy because foreign manufacturers can lower their prices without having any impact on their own profit margins.
In spite of this news, though, shareholders still have reason to be optimistic.
The Sunny Side: The Gusto to Persevere
Harley-Davidson held up pretty well against some rather discouraging headwinds.
In the first quarter, the company reported a total revenue decline of 3.8% to $1.51 billion. This was below analysts’ expectations of $1.59 billion.
However, the company’s net income rose by 1.5% to $269.9 million. This translated to earnings of $1.27 per diluted share in the first quarter.
Furthermore, the net income beat last year’s first-quarter net income of $265.9 million, or $1.21 per diluted share, as well as analysts’ expectations of $1.25 per share last quarter.
The company has undoubtedly shown some vigor in spite of the challenges it faces.
Wait Till August to Ride These Shares
After all, the currency issues won’t last forever, and Harley will benefit from stronger sales as the riding season hits its peak in the coming months. So expect new models to launch in August.
Shareholders and investors alike should wait until the third quarter before buying into or adding to existing share counts. By then, maybe the stronger dollar will quit bullying this hog.
Good investing,
Richard Robinson
The post U.S. Dollar Sends Harley-Davidson Shares Down appeared first on Wall Street Daily.
