Shares of�Harley Davidson (HOG) were down a recent 7.7% to $34.35, one of the biggest losers in the S&P 500, as investors fretted over mixedthird-quarterresults and soft margin guidance.
The motorcycle maker reported earnings of $183.6 million, or 78 cents a share, up from 38 cents a share in the year-earlier period, which included a 2-cent per-share loss on�discontinued�operations. While EPS came in two cents ahead of the consensus, revenue of $1.23 billion was below the $1.29 billion that analysts were anticipating. Moreover, gross margin shrank to 33.7% from 34.9%, and the company lowered its full year margin forecast by 0.5%.
Morningstar analysts attributed the margin pressures to “a mix shift due to capacity constraints at the York manufacturing facility, higher raw-material costs, and unfavorable foreign exchange,” maintaining their Neutral rating on the company. “We do not believe Harley will be able to increase shipments ahead of retail sales indefinitely, and as a result of this and global market instability, we expect shipment growth to slow again in 2012. We remain concerned that retail sales may fail to gain the traction implied by recent shipments, potentially putting pressure on the stock. Once economic stability returns, pent-up demand for Harley-Davidson products should materialize and drive both shipments and retail sales to levels we would be more excited about.”
Despite the weak economy, global sales rose 5.1%, with 5.6% growth in the U.S.
J.P. Morgan analyst Himanshu Patel and team also reiterated a Neutral rating on HOG, writing that without a much lower-than-anticipated tax rate, EPS would have also missed consensus estimates.
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