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Harley-Davidson plunges after missing estimates

Gabrielle Coppola
Bloomberg

Harley-Davidson Inc. capped its fifth straight annual U.S. sales decline with quarterly profit and revenue that missed estimates, pushing its shares down the most in a year.

Motorcycle revenue and shipments fell more than expected, adding urgency to Chief Executive Officer Matt Levatich’s effort to expand the Milwaukee-based manufacturer’s sales overseas. While Asia Pacific was the sole region to show an annual sales increase, deliveries continued to shrink in Harley’s largest market as it struggles to draw new and younger U.S. riders.

Harley Davidson motorcycles are on display at a dealership in Ashland, Va., Thursday, Oct. 17, 2019.

U.S. retail sales have risen only once in the last 21 quarters, and that happened more than three years ago. Harley is investing in new products like electric motorcycles and middle-weight models to counter that trend, but that’s adding pressure on margins for now. It’s also making cheaper, lighter bikes to tap into demand in emerging markets in an effort to get half of its revenue from outside the U.S. by 2027.

Adjusted earnings rose to 20 cents a share in the quarter, the company said in a statement Tuesday, missing analysts’ average estimate for 25 cents. Its shares fell as much as 6.9% before paring declines, falling 2.4% to $34 at 9:50 a.m. in New York.

Operating income for Harley-Davidson Financial Services fell due to higher provisions for loan losses, Chief Financial Officer John Olin told investors. International sales rose 0.5% in the quarter but were down 3% for the year.

Harley doesn’t expect to see significant revenue growth or margin expansion until 2021. It’s launching middleweight models and children’s e-bikes late this year. LiveWire, the company’s first all-electric motorcycle, began shipping to dealers in September.

“Our return to growth is not in the distance – it’s right around the corner, and 2020 is our pivotal year,” Levatich told investors on an earnings call.

Earlier this month, Harley said it’s planning to give long-term shareholders the power to directly nominate board members, a move that could give investors more influence.

The iconic motorcycle maker has also had to contend with added costs from U.S. President Donald Trump’s trade war. The company built a new factory in Thailand in 2019 that allows it to sidestep tariffs imposed by the European Union in response to U.S. steel tariffs.