S&P Cuts Harley-Davidson to Sell

From BW:

We continue to like Harley’s strong brand and market leadership. Also, we expect more dividend hikes and stock repurchases as the company utilizes free cash flow. However, in our view, based on our EPS estimates for 2006 and 2007, the stock is now at ample p-e premiums of 10% and 12% to the S&P 500, respectively. Also, we have some concern that an aging U.S. population will limit longer-term domestic motorcycle sales. Based on our discounted cash-flow model, we are keeping our 12-month target price at $62.

By my math, Harley (HOG) is going for 15.77 times next year’s earnings ($65.64/$4.16), and the S&P 500 is going for 14.06 times 2007’s earnings (1336.18/95.04). That works out to a premium of 12.2%.

Posted by on September 27th, 2006 at 10:18 am

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