A four-year sales decline has cut the American icon’s stock (ticker: HOG) in half over that stretch—to a recent $35. And the wintry December period is always the bike business’s seasonal low.
“They’ve had a tough go of it, the last four years,” says Wedbush analyst James Hardiman, “and I’m not hugely optimistic that 2020 is going to be meaningfully different.”
See our 2017 cover story on Harley:Harley-Davidson: Uneasy Rider
Hardiman estimates that Harley’s revenue fell 5% year over year in the December quarter, to about $900 million. That would mean full-year revenue of some $4.6 billion, for a 7% decline from 2018.
Earnings for the quarter were 10 cents a share, he figures, or 25 cents if you back out the tariffs that have added to Harley’s woes amid the Trump trade wars. Yearly earnings for 2019 would therefore be $2.68 a share, or $3.39 pro forma for tariffs, Hardiman calculates. Earnings in 2018 were $3.30 a share.
The quarter ended in September briefly cheered investors, as Harley reported a 3% rise in the retail sales of its international dealers, after declines in the prior three quarters. Hardiman will be watching to see if the trend continued in December.
The important new product of 2019 was supposed to be Harley-Davidson’s first electric motorcycle, the LiveWire. But deliveries were delayed and when dealers finally got a few units in November, they had missed the fall selling season. Like most analysts, Hardiman doubts there is much of a market among Harley riders for the $30,000 gadget.
The next important product introductions won’t happen until late 2020. The new motorcycles will be middleweight bikes, targeted at growing niches that have proven popular abroad. The Bronx will compete in the so-called streetfighter category, favored by city riders who dart in and out of traffic. The Pan America will be Harley’s entry in the adventure touring class, better suited for off-road riding than the company’s traditional heavy machines.
But Harley-Davidson’s main sales and profits will continue to rely on demand for big, expensive road bikes. The Boomers who bought them are aging past their riding years. Wedbush’s Hardiman sounds a bit regretful that Harley’s hardships oblige him to rate the stock at Neutral.
“They are one of a dying breed of truly American companies,” he says. “As negative as I’ve been on these guys for a while, you hate to see a company like that not being able to find its footing.”