beat second-quarter earnings expectations, but motorcycle and related product sales were lower than anticipated. After initially rising in premarket trading Wednesday, the stock fell fast shortly after the market opened.
Harley-Davidson stock (ticker: HOG) was down 6.8% to $40.82 in Wednesday morning trading, while the
index was up 0.6%. The company reported adjusted earnings of $1.41 a share, topping consensus estimates at $1.21 a share. But sales in the key motorcycles and related products segment came in at $1.33 billion, lower than estimates of $1.39 billion.
Edward Jones analyst Brian Yarbrough told Barron’s via email that the bulk of the earnings beat came from Harley-Davidson’s financial services division. He thinks the segment will see headwinds in the coming quarters as stimulus and Covid-19 relief fades.
He did point out in a note to clients that the company is selling more new bikes at full price, while used bikes are seeing stronger pricing. In the earnings release, Harley-Davidson CEO
who is now in his second year in that role at the motorcycle giant, pointed to progress for the company’s turnaround plan, which is nicknamed “Hardwire.”
“We are encouraged by the signs of consumer positivity in the market; however, we remain mindful of the significant supply chain challenges that we expect to continue to impact the sector,” Zeitz said in the earnings release.
In a separate news release, Harley-Davidson said it launched in the U.S. an online platform for preowned motorcycles called H-D1 Marketplace. On it, users can buy and sell bikes through the Harley-Davidson dealer network.
“The H-D1 Marketplace platform will connect our customers, community and our strong dealer network, with the goal to become the largest marketplace for preowned Harley-Davidson motorcycles in the United States,” Zeitz said.
Raymond James analyst Joseph Altobello noted the company raised its 2021 outlook for motorcycle division margins and financial services segment operating income. Still, negotiations with the European Union related to motorcycle tariffs provide some uncertainty for the firm.
Even with Wednesday morning’s drop, Harley stock is up about 43% in the past 12 months. Analysts are mixed on what comes next. Of the 17 analysts listed by FactSet, eight have Buy or equivalent ratings, while seven have Hold or equivalent ratings. Yarbrough has a Hold rating on the stock.
“I think the stock is suffering as the company is seeing many forms of inflation (raw materials, transportation) and supply chain issues that will constrain the second half,” Yarbrough added. “Overall, I just think people remain concerned about the long -term demand trends for the brand and thus the high short interest ratio that can also impact the stock price.”
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