Analyst Note| Jaime M. Katz, CFA |
Strides in profit improvement were the bright point in Harley-Davidson’s fiscal second quarter, as the firm printed an adjusted motorcycle operating margin of 15.2%. This was a significant jump over last year’s negative metric, which was hurt by COVID-19-related shutdowns, weaker product mix, and higher restructuring expenses. Shipments rose 100%, to around 57,000 units. However, this still marks a 18% decline over second-quarter 2019 volumes, and we forecast shipments that will be about 10% lower than 2019 levels for full-year 2021 as Harley has continued to prune underperforming dealers, countries, and bike models. Our full-year motorcycle segment revenue outlook was in line with management’s reiterated guidance for 30%-35% growth, which implies second-half sales growth of around 22%, but we caution investors that global supply chain constraints could disrupt the near-term trajectory of profit improvement to a greater degree than we forecast, depending on duration and magnitude of rework required.