Harley-Davidson on Monday raised its full-year earnings forecast after smashing analysts’ quarterly revenue estimates, vindicating Chief Govt Jochen Zeitz’s resolution to give attention to more-profitable touring bikes on the expense of cheaper entry-level fashions.
The bike maker’s shares, which have jumped 36% because the final earnings report in February, had been up about 10% at $44.38 on Monday after earlier rising as a lot as 15%.
The corporate, nonetheless, additionally acquired a setback within the European Union — its second-biggest market — the place all of its merchandise, no matter origin, will probably be subjected to a 56% import tariff from June following a brand new EU ruling.
The ruling revokes the credentials that presently enable Harley to ship sure bikes to the EU from its worldwide manufacturing services at a 6% tariff.
The Milwaukee, Wisconsin-based firm mentioned it could lodge an “speedy” authorized problem to what it dubbed “an unprecedented scenario.”
Harley warned {that a} failure to mitigate the extra EU tariffs would additionally influence its working revenue this 12 months, which is forecast to be 7%-9% — up 200 foundation factors from the earlier steering.
Within the newest quarter, Harley reported a 31% year-on-year bounce in retail gross sales in the USA. It’s the first quarterly gross sales enhance in its greatest market in six years.
The gross sales, nonetheless, had been helped by a positive statistical base as most of its dealerships in the USA had been hit by pandemic-linked lockdowns final 12 months.
Brian Yarbrough, an analyst at EdwardJones, mentioned the corporate’s resolution to cut back stock and change the introduction of latest fashions to January from August, along with stimulus funds to American households, have helped the corporate’s earnings.
Nonetheless, it nonetheless faces the problem of attracting youthful shoppers to assist drive sustainable gross sales development, Yarbrough mentioned.
Which may be one purpose why Harley’s shares are nonetheless down about 40% from their 2014 highs, as some traders reckon the corporate’s give attention to revenue does not tackle methods to broaden the model’s attraction past middle-aged and prosperous riders.
Below Zeitz, Harley has executed away with among the cheaper entry-level fashions and is ramping up funding in touring, massive cruiser and trike bike segments that drive firm revenue.
To construct model loyalty and entice new clients, the corporate is rolling out an authorized pre-owned bike program, adapting a method carmakers have been following for years.
Harley expects revenues from its bike enterprise to surge 30% to 35% in 2021, in contrast with a 20% to 25% enhance estimated in February.
Adjusted earnings for the quarter got here in at $1.68 per share, above the 88 cents per share estimated by analysts in a Refinitiv survey.
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