You are on page 1of 3

Harley-Davidson, Inc.

Harley-Davidson, Inc. - Financial and Strategic Analysis Review


Reference Code: GDAUT29887FSA

Publication Date: 26-Dec-2014

Company Snapshot

Company Overview

Key Information

Harley-Davidson, Inc. (Harley-Davidson) is a motorcycles


manufacturing company. It designs, manufactures, and
markets motorcycles and motorcycle parts, accessories,
and general merchandise on wholesale basis. Moreover,
the company also provides wholesale and retail financing,
and insurance programs to its dealers and customers in
the US, and Canada. Further, Harley-Davidson conducts
e-Commerce business through which it sells motorcycle
parts, accessories, and related products and services. The
company offers its products under six platforms, namely,
Touring, Dyna, Softail, Sportster, V-Rod, and Street.

Harley-Davidson, Inc., Key Information


Web Address
www.harley-davidson.com
Financial year-end
December
Number of Employees
5,800
NYSE
HOG
Source : GlobalData

Key Ratios
Harley-Davidson, Inc., Key Ratios
P/E

20.03.00

EV/EBITDA

16.62

Return on Equity (%)

24.39

Debt/Equity
Operating profit margin (%)
Dividend Yield

1.75
19.55
0.01

Note: Above ratios are based on share price as of 23-Dec-2014

SWOT Analysis
Harley-Davidson, Inc., SWOT Analysis
Strengths
Weaknesses
Broad Product and Service
Portfolio

Dependence on the US
Market

Improving Profitability
Strong Brand Image

Source : GlobalData

Opportunities

Share Data

Threats

Emerging Markets

Procurement of Raw Materials

Focused Research and


Development Activities

Competitive Landscape

Harley-Davidson, Inc., Share Data


Price (USD) as on 23-Dec-2014
EPS (USD)
Book value per share (USD)
Shares Outstanding (in million)

65.60
3.28

New Emission Standards for


Two Wheelers

13.68
224.07

Source : GlobalData

Source : GlobalData

Performance Chart

Financial Performance

Harley-Davidson, Inc., Performance Chart (2009 - 2013)

Source : GlobalData

Harley-Davidson, Inc.- Financial and Strategic Analysis Review

The company reported revenues of (US Dollars)


US$5,899.9 million for the fiscal year ended December
2013 (FY2013), an increase of 5.7% over FY2012. In
FY2013, the companys operating margin was 19.6%,
compared to an operating margin of 17.9% in FY2012.
In FY2013, the company recorded a net margin of
12.4%, compared to a net margin of 11.2% in FY2012.
The company reported revenues of US$1,301.6 million
for the third quarter ended September 2014, a decrease
of 34.9% over the previous quarter.

Reference Code: GDAUT29887FSA


Page 1

Harley-Davidson, Inc.
Harley-Davidson, Inc. - SWOT Analysis
SWOT Analysis - Overview
Harley-Davidson, Inc. (Harley-Davidson) designs, manufactures, and sells heavyweight motorcycles. The company
markets its products in North America, Europe, Asia/Pacific and Latin America. The companys strong brand image,
coupled with its wide range of products, helps it to be a front-runner in the industry. Nonetheless, emerging markets,
especially Asian markets, and focus on research and development could ensure a strong future for the company. New
emission standards for two wheelers and the prevailing competition could negatively impact the companys growth.
Harley-Davidson, Inc. - Strengths
Strength - Broad Product and Service Portfolio
Harley-Davidson offers a broad array of products and services through its two business segments, namely, the Motorcycles
& Related Products segment and the Financial Services segment. The company offers a variety of products in the
motorcycle segment to cater to the various needs of its customer base. Harley-Davidson designs, manufactures and sells
heavyweight touring, custom and performance motorcycles, besides a line of motorcycle parts, accessories, general
merchandise and related services. Harley-Davidson is well known for its unique motorcycles. Its subsidiary,
Harley-Davidson Motor Company (HDMC), manufactures five families of motorcycles, namely, Touring, Dyna, Softail,
Sportster and V-Rod. These models are distinguished by their frame, engine, suspension, and other characteristics.
Through Harley-Davidson Financial Services (HDFS), the company offers a package of wholesale and retail financial
services for its products, providing it a competitive edge in the motorcycles business in the US and Canada regions. HDFS
provides wholesale financial services to Harley-Davidson motorcycle dealers, including floor plan and open account
financing of motorcycles and motorcycle parts and accessories. These specific services provide a competitive edge to the
company in capturing a higher market share and enhancing its bottom line.
Strength - Improving Profitability
Harley-Davidson reported improvement in its operational performance during FY2013. In FY2013, the company reported
17.6% increase in its net income to US$733.9 million as compared to US$623.9 million in FY2012. The increase in its net
income was due to 5.7% increase in its total revenue to US$5,899.8 million. Its operating costs as a percentage of revenue
declined to 80% as compared to 82% in FY2012. The companys operating income increased 15.3% to US$1,153 million
as compared to US$1000 million in FY2012. In FY2013, its operating margin and net profit margin has increased to 19.5%
and 12.4% respectively as compared to 17.9% and 11.2% respectively in FY2012.
Strength - Strong Brand Image
Harley-Davidson owns one of the strongest brands in the world, which helps it attract and retain a loyal customer base. The
company established a strong brand image with its motorcycles achieving iconic status and being ranked among the
worlds most valuable brands. Harley-Davidson has been continuously ranked among the top 100 global brands in the
world. The company is the market leader in the US heavyweight market; and has strong market position in the heavyweight
motorcycle market share in nine countries across Europe. Harley-Davidsons motorcycles are known for their traditional
styling, design simplicity, durability and quality. The company achieved industry recognition for its high quality, best design,
robust performance and unflinching customer confidence, loyalty and trust of its products and services. The
Harley-Davidson brand has significantly contributed to the success of the company by building strong market recognition
and a loyal customer base.
Harley-Davidson, Inc. - Weaknesses
Weakness - Dependence on the US Market
Harley-Davidson focuses predominantly on the US and generates a major part of its revenue from that market, which could
increase its business risk. Of the total revenue generated by Motorcycles segment, the US contributed approximately
67.7%, followed by EMEA with 14.6%, Japan with 4.2%, Canada with 3.9%, Australia with 3.7%, and Other foreign
countries with 5.9%. Of the total revenue generated by Financial Services segment, the US contributed 95%, followed by
Europe with 0.7%, Canada with 3.8%, and Other foreign countries with 0.5%. As a result, the companys operations are
more susceptible to regional factors, which include changes in the economy, weather conditions, demographics and
population, as compared to the more geographically balanced competitors. Any adverse conditions in the US economy
could adversely affect the company's results of operations.
Harley-Davidson, Inc. - Opportunities
Opportunity - Emerging Markets
The company's presence in emerging economies such as India could prove to be very beneficial to the company. In
November 2013, the company announced to manufacture Street motorcycles in India with low price range, aiming towards
the young audience offering good city performance. Similarly, the company is considering an entry into the 250-300cc bike

Harley-Davidson, Inc.- Financial and Strategic Analysis Review

Reference Code: GDAUT29887FSA


Page 2

Harley-Davidson, Inc.

segment. According to analyst, the motorcycle demand is expected to reach more than 20 million in India by 2020. In India,
only 6% of the total population has motorcycles. Similarly, market penetration in Indonesia, Brazil, Vietnam, Thailand and
Taiwan are 20.8%, 7.6%, 29.6%, 25.4% and 62.4% respectively. Therefore, these markets offer huge potential for growth.
Passenger vehicles accounted for 16% of the total number of vehicles sold in India. This was due to the easy availability of
the loans to customers, and the growing number of people in the earning population segment in the country. With
competition at its peak and markets getting saturated, the company can look out for new growth avenues in these regions.
Opportunity - Focused Research and Development Activities
Harley-Davidson has a strong research and development unit that facilitates innovation and attracts industry attention. Its
Product Development Center (PDC) undertakes the development of new and better quality products. The companys
research and development (R&D) activities focus on new product development to support innovation. In FY2013
Harley-Davidsons R&D expenses amounted for US$152.2 million compared to that of US$137.3 million in the previous
year. Harley-Davidsons continuous focus on R&D helped the company in launching innovative products such as Softail
motorcycles with 1584 cc engine with new features such as new hand controls, a larger odometer, and an anti-lock braking
system option. Continuous research and development activity enables the company to maintain a leading position in
custom and touring motorcycle market and develop products for the performance segment. Focused R&D activities enable
the company to offer innovative products and improve its operational performance.
Harley-Davidson, Inc. - Threats
Threat - Procurement of Raw Materials
Harley-Davidson relies on suppliers to obtain raw materials and provide components for use in manufacturing its
motorcycles. It depends on a single supplier for certain of its raw materials. Such a situation makes the companys
business dependent on the ability of the supplier to deliver the ordered raw materials in time. The rising input costs could
also have a major impact on the operational costs of Harley-Davidson. Increasing pressure of the costs of commodities
leads to capacity constraints, lower production and financial distress to raw material suppliers. In case of a delay in
receiving the raw materials, product delivery to its customers could also get delayed, which impacts its business and
customer relations.
Threat - Competitive Landscape
Harley-Davidson manufactures motorcycles in the US, Canada, Europe, and Asia. Many of the companys competitors
have more diversified businesses and they may compete in the automotive market or all segments of the motorcycle
market. Its motorcycle retail prices are generally higher than that of its competitors. If price becomes a crucial factor for
consumers in the heavyweight motorcycle market, Harley-Davidson would be at a competitive disadvantage. Moreover, its
financial services operations face stiff competition from various banks, insurance companies and other financial institutions
that may have access to additional sources of capital at more competitive rates and terms, particularly for borrowers in
higher credit tiers. The companys failure to address and respond to these competitive pressures worldwide would have a
material adverse effect on its market share.
Threat - New Emission Standards for Two Wheelers
Harley-Davidson could face increased challenges in its two wheeler business due to the stringent emission standards.
According to Dealernews.com, motorcycle industry stakeholders in Europe announced plans to increase 3 emission
standards to more stringent 5 standards by 2015. It also proposed the introduction of more stringent emission test cycle,
and 5 standard for motorcycles by 2015. Such implementations might require the company to redesign its vehicles, which
could result in increased operating costs. Failure to comply with the standards could result in penalties and affect its profit
margins.

NOTE:
* Sector average represents top companies within the specified sector
The above strategic analysis is based on in-house research and reflects the publishers opinion only

Harley-Davidson, Inc.- Financial and Strategic Analysis Review

Reference Code: GDAUT29887FSA


Page 3