Harley sales roar ahead of expectations
Motorcycle-maker outperforms its competition in each of its major markets Q3 PROFIT UP 16%
CHICAGO •
Harley-Davidson Inc. HDI.N yesterday posted a 16% increase in third- quarter profit as demand for its iconic motorcycles rose more than the market, sending shares up more than 6%.
Net income increased to $264.9-million, or 96¢ a share, from almost $229-million, or 77¢ a share, a year earlier. Analysts on average were expecting 90¢ a share, according to Reuters Estimates.
Sales rose 10% to $1.43-billion, meeting Wall Street’s expectations, as demand for Harley motorcycles outpaced the total industry in each of the company’s major markets.
“Not only were retail sales good in the quarter, outperforming the market, but also the guidance for next year is up 6% to 7%, which is in line with what the Street had,” said FTN Midwest Research analyst Brian Rayle, who has a “neutral” rating on Harley’s stock.
Investors have been concerned about whether the Milwaukeebased company can achieve its long-term growth targets amid fears of slowing retail demand for its Harley brand.
Shares of Harley, whose competitors include Honda Motor Co. Ltd. 7267. T and Kawasaki Heavy Industries Ltd. 7012. T, have slid almost 25% so far this year, compared with a 2.2% decline in the Standard & Poor’s 500 index .SPX.
“Our motorcycles sold at a brisk pace in all of our worldwide markets,” chief executive Jim Ziemer said in a statement, citing a 12% increase in U. S. retail sales of the Harley brand motorcycles.
Retail sales rose 11.5% in Europe and 13% in Japan. Retail sales worldwide rose 12.1%.
The company said it remains on track to ship 329,000 Harley motorcycles this year and affirmed its 2005 profit outlook.
In July, Harley raised its earningsgrowth target for the year due to share repurchases to between 10% and 13% from a previous range of 5% to 8%.
Given uncertainty surrounding consumer confidence, increasing fuel prices and rising interest rates, the company set a 2006 shipment target range of 348,000 to 352,000 Harley motorcycles, Mr. Ziemer said, calling it a “conservative outlook.”
Harley also broadened its long-term forecast on wholesale unit growth to 5% to 9% annually, he said. That supports an annual earnings-per-share growth target in the range of 11%to 17%.
It previously said its longerterm growth forecast for motorcycle unit shipments was 7% to 9%, supporting earnings-pershare percentage increases in the mid-teens.
Third- quarter sales from Harley motorcycles rose 11.4% to $ 1.11- billion, while global shipments increased 8.7% to 87,585 units.
Harley’s gross profit margin in the quarter improved to 39.2% of sales, compared with 38% a year before, due mostly to strong sales of higher-profit vehicles.
In trading before the market opened, Harley shares were up $3.00, or 6.6%, to $48.60 on the Inet electronic brokerage from Tuesday’s New York Stock Exchange close.