Harley’s Roadkill Earnings (HOG)

January 23, 2009 by Douglas A. McIntyre

Harley_logoHarley-Davidson, Inc. (NYSE: HOG) is looking about as ugly as you could expect.  The motorcycle manufacturer posted dismal earnings, announced a factory mothballing, and announced layoffs.  This doesn’t just throw 2009 into the toilet.  This economy could end up shunning the company for quite a bit longer than anyone would have expected even last year.

What is interesting about the miss is that the company still managedto post earnings at $0.34 EPS.  First Call had estimates at $0.57 EPS.Revenue was in-line at $1.29 billion. The amazing part is that it is still profitable.

Harley plans to increase shipments in the first quarter, but itsshipments will drop off significantly thereafter.  It expects to ship74,000 to 78,000 new motorcycles, a 3% to 8% increase over year agolevels.  But for 2009,  the company sees shipments of 264,000 to273,000 new motorcycles, which is a drop of 10% to 13% from its 2008levels.  It also expects the 2008 margins of about 34.5% to drop 3to 4 points.  Does it shock you that there is a loss at the company’sin-house finance unit?

We do not blame the company for taking this stance, but the company isnot offering financial guidance for the year.  But we do know cost cutsand job cuts are headed its way.  Pink slips are being handed out thisyear to about 1,100 workers.  That is about 12% of its workforce.  Itis also closing down some plants and combining two engine andtransmission plants.  The paint frame operations are being consolidatedinto one facility and it is will close its parts and accessoriesdistribution center in favor of using third parties to distribute thoseproducts.

Shares of Harley are down almost 20% pre-market and are now challengingthe $10.00 stock price handle.  You have to go back to 1998 or 1998when you adjust for splits and adjust for dividends to get share pricesthis low.

The prior 52-week trading range was $11.54 to $48.05.  It looks likewhen we reported "Riding To Hell on a Harley" that we were being nice.Shares were almost $50.00 at that time.

Jon C. Ogg
January 23, 2009