Core Viewpoint - Harley-Davidson, Inc. (NYSE:HOG) is facing challenges with its fourth-quarter results and fiscal 2026 guidance, prompting analysts to lower their price targets while maintaining positive ratings, indicating a potential turnaround strategy in place [2][3]. Financial Performance - Harley-Davidson reported fourth-quarter revenue of $496 million, exceeding the consensus estimate of $479.83 million [4]. - The company is taking steps to stabilize operations and align wholesale shipments with retail demand, reflecting a commitment to long-term earnings and cash-flow potential [4]. Analyst Ratings and Price Targets - DA Davidson lowered its price target on Harley-Davidson to $25 from $30 while maintaining a Buy rating, citing fourth-quarter results and fiscal 2026 guidance below expectations [2]. - BMO Capital also reduced its price target to $24 from $30, keeping an Outperform rating, and noted that initial 2026 guidance was disappointing due to various strategic adjustments [3]. Strategic Initiatives - Management is focused on inventory cleanup and rebuilding dealer confidence as part of a turnaround strategy for 2026 [2][4]. - The company is undergoing "reset" actions, including channel right-sizing and strengthening the dealer network, which are seen as reasonable steps to improve performance [3].

Core Viewpoint - The article emphasizes the investment philosophy focused on identifying mispriced securities through understanding the financial drivers of companies, often revealed by DCF model valuation [1]. Group 1: Investment Philosophy - The investment approach is centered on small cap companies across US, Canadian, and European markets [1]. - The methodology allows for flexibility beyond traditional investment styles, incorporating value, dividend, and growth investing to assess a stock's risk-to-reward profile [1].

Core Insights - Harley-Davidson reported weaker quarterly earnings, indicating potential financial struggles for the company [1] - The motorcycle maker received a warning that its debt ratings may be downgraded to junk status by spring, which could impact its borrowing costs and investor confidence [1] Financial Performance - The company’s quarterly earnings were below expectations, suggesting a decline in profitability [1] Debt Ratings - A warning has been issued regarding the potential downgrade of Harley-Davidson's debt ratings to junk status, which typically signifies higher risk for investors [1]

Core Viewpoint - Harley-Davidson reported fourth-quarter and full-year 2025 earnings that fell short of analyst expectations, indicating ongoing demand weakness and wider per-share losses than forecasted [1] Financial Performance - The company reported wider per-share losses compared to analyst forecasts [1] - Revenue also fell short of some projections, reflecting the challenges in demand [1]

Market Overview - Pre-market indexes are slightly pulling back after a record close from the Dow, with the Dow down 30 points (-0.06%) and the S&P 500 down 1 point, while the Nasdaq is up 8 points (+0.035%) [1] Economic Reports - Retail Sales for December showed no growth at 0.0%, a significant drop from November's +0.6%, indicating a cooling in consumer spending [2] - Import Prices for December increased by +0.1%, slightly above expectations, with food prices rising +0.5% while fuel prices dropped -1.5% [3] - Exports for December rose +0.3%, marking the highest increase since July, with a year-over-year growth of +3.1% [4] Q4 Earnings Reports - Coca-Cola (KO) reported Q4 earnings of $0.58 per share, beating estimates by a penny, but revenues of $11.82 billion fell short of expectations by -1.95% [5] - Spotify (SPOT) exceeded earnings expectations with $5.16 per share, a +63.3% surprise, and revenues of $5.27 billion, surpassing estimates by +2.57% [6] - Hasbro (HAS) reported earnings of $1.51 per share, significantly beating expectations of $0.99, with revenues of $1.45 billion driven by a +4671% growth in Hasbro Entertainment [7] - Harley Davidson (HOG) faced disappointing results with a loss of -$2.44 per share, missing estimates by -165%, and revenues of $390.55 million falling short by -25.9% [8]

Economic Reports - Retail Sales for December registered 0.0%, a significant drop from +0.6% in November, indicating a cooling in consumer spending [3] - Import Prices increased by +0.1%, slightly above expectations, while food, feed, and beverage prices rose by +0.5%, and fuel prices decreased by -1.5% [4] - Exports rose by +0.3%, marking the highest increase since July, with a year-over-year growth of +3.1% [5] Q4 Earnings Reports - Coca-Cola (KO) reported Q4 earnings of 58 cents per share, slightly beating estimates but revenues of $11.82 billion fell -1.95% short of expectations [6] - Spotify (SPOT) exceeded earnings expectations with $5.16 per share, a +63.3% surprise, and revenues of $5.27 billion, surpassing estimates by +2.57% [7] - Hasbro (HAS) reported earnings of $1.51 per share, significantly above the expected $0.99, with revenues of $1.45 billion, driven by a +4671% growth in Hasbro Entertainment [8] - Harley Davidson (HOG) reported disappointing earnings of -$2.44 per share, missing estimates by -165%, with revenues of $390.55 million falling short by -25.9% [10]

Core Insights - Harley-Davidson reported a revenue of $390.55 million for the quarter ended December 2025, reflecting a decline of 9.4% year-over-year and falling short of the Zacks Consensus Estimate of $527.28 million by 25.93% [1] - The company's earnings per share (EPS) was -$2.44, a significant drop from -$0.93 in the same quarter last year, resulting in an EPS surprise of -165.22% compared to the consensus estimate of -$0.92 [1] Financial Performance - Total worldwide retail sales of Harley-Davidson motorcycles reached 25,287 units, exceeding the average estimate of 21,813 units [4] - Motorcycle shipments totaled 13,515, which was below the average estimate of 18,085 units [4] - Revenue from motorcycles and related products was $390.55 million, significantly lower than the average estimate of $530.92 million, marking a year-over-year decline of 9.4% [4] - Revenue from HDMC's motorcycle segment was $379.2 million, compared to the average estimate of $518.74 million [4] Segment Performance - Revenue from motorcycles was $193.88 million, falling short of the average estimate of $337.66 million, representing a year-over-year decrease of 16.2% [4] - Parts and accessories revenue was $116.51 million, slightly above the average estimate of $111.49 million, with a year-over-year change of -0.9% [4] - Apparel revenue was $47.17 million, below the average estimate of $51.35 million, indicating a decline of 12.8% year-over-year [4] - Revenue from licensing was $7.12 million, surpassing the average estimate of $5.06 million, showing a significant increase of 60.6% year-over-year [4] - Live Wire revenue was $11.35 million, slightly below the average estimate of $12.18 million, but still reflecting a year-over-year growth of 9.2% [4] Stock Performance - Harley-Davidson shares have returned -3.3% over the past month, while the Zacks S&P 500 composite remained unchanged [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Market Overview - US stocks are trading near record highs, with the S&P 500 close to its all-time high of 4,796.56, just about 10 points below that level [6] - Despite the rally, investor sentiment appears cautious, with concerns about the tech sector dominating discussions [7][10] - The energy sector is noted as the best-performing group this year, followed by materials and consumer staples [9] Company Earnings - Coca-Cola's earnings report disappointed investors, with its outlook at the bottom end of expectations, projecting organic revenue growth of 4% to 5%, slightly below the anticipated 5% [27][29] - Spotify reported a significant increase in monthly active users, reaching 751 million, a rise of 11% year-over-year, attributed to successful marketing campaigns [3][43] - Harley-Davidson experienced a 4% drop in shipments, contrary to analyst expectations of a 22% increase, leading to a decline in stock value [45] Consumer Behavior - Recent retail sales data for December showed no growth, significantly worse than the expected 0.4% increase, indicating potential weakness in consumer spending during the holiday season [15][16] - The K-shaped economic recovery is highlighted, with high-income consumers continuing to spend while low-income consumers seek more affordable options [32][34] - Coca-Cola noted that while total spending is up, low-income consumers are increasingly looking for value, opting for smaller packages or shopping at discount stores [32][34] Investment Trends - Alphabet is making headlines by issuing a $1 billion bond with a 100-year maturity, marking a significant move in the tech sector [2][14] - The software sector is facing scrutiny, with concerns about the future earnings visibility of companies like ServiceNow and Salesforce, as AI developments create uncertainty [11][12] - Investors are advised to consider selective buying in software, focusing on companies with strong competitive advantages [51][52]

Core Insights - The company is focused on stabilizing its business by restoring dealer confidence and aligning wholesale activity with retail demand, aiming for sustainable growth in the future [1][3] - Immediate priorities include improving dealer profitability, reigniting brand momentum, and reducing costs, with a commitment to these goals remaining unchanged [1][5] - The company is optimistic about early signs of improvement, particularly in North American retail sales, which have shown growth [2][11] Inventory Management - The company has taken intentional actions to address elevated dealer inventory, particularly in North America, resulting in a 16% decline in dealer inventory relative to year-end 2024 levels [11][33] - Global dealer inventory was down 17% over the same period, exceeding the target of a 10% reduction, indicating solid progress [11][33] - The focus on inventory discipline is central to the company's strategy, with targeted promotional support for touring models and disciplined quarterly planning [10][12] Financial Performance - In Q4 2025, consolidated revenue decreased by 28%, driven by a 10% decline in HDMC revenue and a 59% drop in HDFS revenue [26][28] - The operating loss for Q4 was $361 million, compared to a loss of $193 million in 2024, with significant losses attributed to both HDMC and HDFS [26][27] - For the full year 2025, consolidated revenue was $4.5 billion, a 14% decrease compared to the previous year, with earnings per share dropping from $3.44 to $2.78 [28][29] Retail Sales Performance - North American retail sales of new motorcycles increased by 5% in Q4, while international sales decreased by 10%, leading to a global retail sales decline of 1% [28][30] - The company experienced strength in lower-priced sport motorcycle models, which were up 33%, while the Grand American touring product saw a 6% increase [30][32] - EMEA retail sales declined by 24% in Q4, reflecting ongoing macroeconomic challenges, while Asia Pacific retail sales were down 1% [30][31] Strategic Initiatives - The company is committed to restoring relationships with dealers, improving inventory management, and enhancing customer focus through a refined product portfolio [5][6] - A new e-commerce strategy is being implemented to drive dealership traffic and support motorcycle sales, addressing previous issues of customer confusion and excessive discounting [8][9] - The company plans to announce a new strategic plan in May, which is expected to outline further initiatives for growth and stability [3][24] Future Outlook - The company anticipates 2026 to be a transition year, with expectations for improved dealer health and a return to long-term earnings power [12][53] - Projected retail units for 2026 are between 130,000 to 135,000, with a similar expectation for wholesale units, indicating a balanced approach to inventory management [54][55] - The company expects to face increased costs from tariffs in 2026, forecasting between $75 million to $105 million based on current levels [55][56]

Financial Data and Key Metrics Changes - Consolidated revenue in Q4 2025 was down 28%, with HDMC revenue down 10% and HDFS revenue down 59% [23] - Consolidated operating income for Q4 was a loss of $361 million, compared to a loss of $193 million in Q4 2024 [23] - For the full year 2025, consolidated revenue was $4.5 billion, a 14% decrease compared to the previous year, with earnings per share at $2.78, down from $3.44 in 2024 [25][44] Business Line Data and Key Metrics Changes - HDMC retail sales in Q4 increased by 5% in North America but decreased by 10% internationally, leading to a global retail sales decline of 1% [25] - For the full year 2025, North American retail sales were down 13%, while EMEA retail sales were down 11% [26][28] - HDMC revenue for the full year decreased by 13% to $3.6 billion, driven by a 16% decrease in wholesale volumes [32] Market Data and Key Metrics Changes - North American dealer inventory declined by 16% year-over-year, while global dealer inventory was down 17%, exceeding the 10% reduction target [10][30] - In Latin America, Q4 retail sales increased by 10%, with both Brazil and Mexico showing growth [29] - Asia Pacific retail sales were down 15% for the full year, with significant weakness in China [28] Company Strategy and Development Direction - The company is focused on stabilizing the business by restoring dealer confidence and aligning wholesale activity with retail demand [5] - Immediate priorities include improving dealer profitability, reigniting brand momentum, and reducing costs [6] - A strategic plan announcement is expected in May 2026, aiming for sustainable growth [4][21] Management's Comments on Operating Environment and Future Outlook - Management views 2026 as a transition year to reset the business and finalize the new strategy, with expectations of operating margin pressure due to lower production runs [11][48] - The company anticipates a cost of $75 million to $105 million in new or increased tariffs for 2026, compared to $67 million in 2025 [48] - Management is optimistic about the brand's potential and is committed to rebuilding trust and long-term earnings power [21] Other Important Information - The HDFS transaction is expected to transform the financial services model into a capital-light, de-risked business [22] - The company plans to conduct a rigorous review of its cost base and operating expenses, targeting at least $150 million in annual run rate savings starting in 2027 [18][73] - LiveWire is focusing on launching new products and expanding its network while managing costs [42] Q&A Session Summary Question: HDFS operating income expectations - Analyst inquired about the HDFS operating income expectations, which were lower than initially anticipated, and sought clarification on the long-term profitability of the business [52] - Management explained that HDFS is expected to stabilize and potentially triple its income over the next few years, but current volume levels are lower than expected [53][55] Question: Wholesale guidance and inventory levels - Analyst asked about the cadence of wholesale shipments and inventory levels for 2026 [58] - Management indicated that Q1 2026 wholesale shipments would be lower than the previous year, with an expected increase in Q2, while emphasizing the importance of healthy inventory levels [59][63] Question: Retail expectations and LiveWire investment - Analyst questioned the expectations for global retail sales and the willingness to invest in LiveWire despite potential losses [64] - Management expressed optimism about new product launches and the potential for retail sales growth, while confirming continued investment in LiveWire [66][70]