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Harley-Davidson Inc HOG

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Wide-Moat Harley Delivers Solid Q2 Sales and Margin Lift; Rest of 2021 Set for Lower Profitability

Jaime M. Katz, CFA Senior Equity Analyst

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.

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Company Profile

Business Description

Harley-Davidson is a global leading manufacturer of heavyweight motorcycles, merchandise, parts, and accessories. It sells custom, cruiser, and touring motorcycles and offers a complete line of Harley-Davidson motorcycle parts, accessories, riding gear, and apparel, as well as merchandise. Harley-Davidson Financial Services provides wholesale financing to dealers and retail financing and insurance brokerage services to customers. Harley has historically captured about half of all heavyweight domestic retail motorcycle registrations, a metric it has ceded in 2020 as it has repositioned the business. The firm recently expanded into the middleweight market with the launch of the Pan America model.

Contact
3700 West Juneau Avenue
Milwaukee, WI, 53208
T +1 414 342-4680
Sector Consumer Cyclical
Industry Recreational Vehicles
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 4,600

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