Here are some of the more notable elements of Harley Davidson’s (HOG) conference call.
International shipments:
* 22,114 units were up 20.5% compared to the same quarter last year.
* International shipments grew to 27.2% of total worldwide fourth quarter shipment volume compared to 19.8% in the fourth quarter of 2006.
* International shipments for the full year grew to 26.9% of the mix, up from 21.8% in 2006
* Europe was once again strong with a year-over-year sales increase of 10.9%, Japan was up 4.5%, Canada was up 45.9%, or 605 units, primarily due to better product availability during the quarter. The remaining 45 or so countries where motorcycles are sold were up a collective 28.6% for the quarter.
From the Q % A:
James Hardiman – FTN Midwest
Okay, and then my second question, I was wondering if you could just flesh out a little bit more sort of how you’ve been able to remain so strong internationally, and I guess especially in the Canadian market, and where you expect that to go if — you know, when you look at some of the economies of some of the countries that you do business in, are they correlated to the U.S. market? Sort of what you are seeing internationally and whether or not we can expect that to continue?
James L. Ziemer
I’ll answer that question — on retail sales outside the U.S., we are strong in all the markets outside the U.S. without exception when you look at it on a total year basis, whether it be Canada or Europe or Australia or Japan, and the markets of Latin America.
That’s driven by many different things. Their economies are doing well. Certainly the weak dollar has contributed to some of that but as we continue to build a distribution network and we acquire some of our independent distributors over the last five, six years, I mean, we are doing things and rationalizing the dealer networks in many of the countries we sell into. We’ve acquired in the last year the Australian distributors. We have just recently acquired the distributorship in Mexico, so we continue to take on that strategy so that as we own the distribution network, we can operate that for the long-term health of the business and sell customers the experience that helps make us strong and differentiates us from our competition.
Q & A 2008 Outlook:
Ed Aaron – RBC Capital Markets
A couple of questions; first, you said recently that your guidance for ’08 sort of operated under the assumption that 2008 economic environment would be similar to 2007, but you didn’t change your guidance. Is that still your assumption or are you now planning for a weaker economy in the U.S. but feel better about your international business?
Thomas E. Bergmann
Just to add on, I think Jim’s got it. There is no doubt we think 2008 is going to be a challenging year for us and for the industry. And you know, when we put the guidance out, things — probably the indications have gotten a little, have deteriorated a little further, so it’s going to be a challenging year.
But as Jim said, our guidance was built around a cautious approach to the year and we are going to look at the environment very closely and watch it and we’ll make the appropriate changes if we need to at any point in time.
But the good thing is the international business, as you mentioned, continues to do very well and we are continuing to be very pleased with the progress we are making in the markets and it continues to deliver strong results and we see that continuing in 2008.
In response to another question:
Thomas E. Bergmann
Clearly there’s a lot that goes into the bottom line of delivering our EPS guidance and that’s really management’s challenge this year, is to work through the challenging economy here in the U.S., continue to grow our international business, allocate capital smartly, and the share repurchase activities or other business initiatives to drive growth. And we’re prepared to do that. It’s going to be a challenging year but at this point in time, with all the activities around the 105th and international, we’re at this point in time comfortable with the guidance.
Bottom line? HOG expects the US to be anemic again in 2008 but international operations to continue their upward surge. I have confidence in the 4% to 7% EPS growth estimates and that means shares will trade below 10 times 2008 earnings and continue to yield over 3% at this levels. For a company like HOG, that is a steal.
Disclosure (“none” means no position): Long HOG
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