Harley-Davidson Stock Is Falling as Investors Look Beyond an Earnings Beat

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July 21, 2021 11:24 americium ET

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Harley-Davidson continues to beryllium affected by proviso concatenation constraints.

Romain Lafabregue/AFP via Getty Images

Harley-Davidson bushed second-quarter net expectations, but motorcycle and related merchandise income were little than anticipated. After initially rising successful premarket trading Wednesday, the banal fell accelerated soon aft the marketplace opened.

Harley-Davidson banal (ticker: HOG) was down 6.8% to $40.82 successful Wednesday greeting trading, portion the S&P 500 scale was up 0.6%. The institution reported adjusted net of $1.41 a share, topping statement estimates astatine $1.21 a share. But income successful the cardinal motorcycles and related products conception came successful astatine $1.33 billion, little than estimates of $1.39 billion.

Edward Jones expert Brian Yarbrough told Barron’s via email that the bulk of the net bushed came from Harley-Davidson’s financial services division. He thinks the conception volition spot headwinds successful the coming quarters arsenic stimulus and Covid-19 alleviation fades.

He did constituent retired successful a enactment to clients that the institution is selling much caller bikes astatine afloat price, portion utilized bikes are seeing stronger pricing. In the net release, Harley-Davidson CEO Jochen Zeitz, who is present successful his 2nd twelvemonth successful that relation astatine the motorcycle giant, pointed to advancement for the company’s turnaround plan, which is nicknamed “Hardwire.”

“We are encouraged by the signs of user positivity successful the market; however, we stay mindful of the important proviso concatenation challenges that we expect to proceed to interaction the sector,” Zeitz said successful the net release.

In a abstracted quality release, Harley-Davidson said it launched successful the U.S. an online level for preowned motorcycles called H-D1 Marketplace. On it, users tin bargain and merchantability bikes done the Harley-Davidson trader network.

“The H-D1 Marketplace platform volition link our customers, assemblage and our beardown trader network, with the extremity to go the largest marketplace for preowned Harley-Davidson motorcycles in the United States,” Zeitz said. 

Raymond James expert Joseph Altobello noted the institution raised its 2021 outlook for motorcycle part margins and fiscal services conception operating income. Still, negotiations with the European Union related to motorcycle tariffs supply immoderate uncertainty for the firm.

Even with Wednesday morning’s drop, Harley banal is up astir 43% in the past 12 months. Analysts are mixed connected what comes next. Of the 17 analysts listed by FactSet, 8 person Buy oregon equivalent ratings, portion 7 person Hold oregon equivalent ratings. Yarbrough has a Hold standing connected the stock.

“I deliberation the banal is suffering arsenic the institution is seeing galore forms of ostentation (raw materials, transportation) and proviso concatenation issues that volition constrain the 2nd half,” Yarbrough added. “Overall, I conscionable deliberation radical stay acrophobic astir the agelong -term request trends for the marque and frankincense the precocious abbreviated involvement ratio that tin besides interaction the banal price.”

Write to Connor Smith at connor.smith@barrons.com

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