Harley-Davidson Inc. (NYSE: HOG) has enough trouble. Its stock is down 35% in the past year. Now, it is in a war about who will be on its board and who will run the company. The dispute has heated up recently, leaving its motorcycle without a rider.
24/7 Wall St. Key Points:
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Harley-Davidson Inc. (NYSE: HOG) stock is down sharply in the past year.
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The motorcycle maker’s investors are squabbling over who should control of board of directors.
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Instructional investor H Partners Management owns 9.1% of Harley’s shares. It wants Chair Jochen Zeitz and directors Thomas Linebarger and Sara Levinson out. Each one has been on the board for over 15 years.
Investors have to make a difficult decision. There are two major proxy advisors in the United States. One, ISS, sided with Harley’s board, saying H Partners does not have a strong case to turn the company around. The other, Glass Lewis, said the current board had “overseen starkly suboptimal shareholder returns.” The board has eight members.
The conclusion of the battle will probably not end until Harley’s annual meeting on May 14. If H Partners wins, it will add its own directors to the board. According to The Wall Street Journal, “The National Powersports Dealer Association, which says it represents about 170 of Harley’s roughly 570 U.S. dealers, publicly sided with H Partners.”
Turning Harley-Davidson Around
Harley is already falling apart, and its problems have accelerated. In the most recently reported quarter, revenue collapsed by 17% to $1.22 billion. Per-share earnings dropped 38% to $1.07. The company carries $5 billion of long-term debt, and it has $1.93 billion of cash on its balance sheet.
Wall Street has turned its back on Harley. Of the 16 analysts that cover the company, two rate it as an Underperform or Sell. Nine rate it a Hold. The median price target among the analysts is $28.59, against a current price of $23.31. Shares traded at $29 apiece at the end of last year.
It is not certain that H Partners can do better than the current board. U.S. motorcycle sales are dropping fast. They were down 11% in March year over year, which is about the same as February.
Harley’s trouble cannot be reversed.
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