The Harley-Davidson Earnings Economic Indicator: All Is Well (HOG, F, GM)

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Harley-Davidson, Inc. (NYSE: HOG) is not exactly a true economic indicator like you could claim against Ford Motor Co. (NYSE: F) or General Motors Corp. (NYSE: GM).  What is interesting though is that it is almost impossible to have a crummy economy and to have Harley-Davidson doing well.  It turns out that there is some raised shipment guidance for 2011.  What does this tell you about the underlying demand trends?

The motorcycle-maker reported earnings from continuing operations in the second quarter rose almost 37% to $190.6 million.  That generated $0.81 EPS as retail sales of new motorcycles rose 7.5% in the U.S. and rose 5.6% worldwide in the second quarter.  Revenues rose to $1.339 billion.  Thomson Reuters was only looking for $0.71 EPS and $1.26 billion in sales.

Dealers sales rose 7.5% to 53,599 new motorcycles in the U.S.; and it shipped 66,815 Harley-Davidson motorcycles to dealers and distributors worldwide during the quarter versus 59,046 motorcycles shipped in the year ago period. Here is the most important data… The company raised its 2011 shipment forecast to between 228,000 and 235,000 new bikes to dealers and distributors worldwide.  This is still an expected gain of 8% to 12% versus 2010.

With the exception of police and the occasional required use from other enterprises, the real question becomes the economy versus ‘willing’ disposable capital.  Motorcycles are generally considered a luxury item now and customers are not going to increase orders if they are continually more and more uncertain.

Harley-Davidson even noted that Financial Services showed operating income of $82.0 million versus $60.8 million a year earlier, which it said was “largely the result of continued improvement in credit performance.”

When you see a report like this you have to wonder just how bad things really are out there. It is easy to push out a new car order from Ford or GM, and cars can be kept indefinitely.  Most motorcycle orders are not exactly “mandatory” purchases.  If the economy is strong enough to support 8% to 12% shipment growth it is not likely that it is just so dealers can hold on to more inventories.

Shares are up 5% pre-market at $43.50 and the 52-week trading range is $23.27 to $44.04.

JON C. OGG