Posted on 04/13/2005 11:55:31 AM PDT by Cagey
NEW YORK (Reuters) - Harley-Davidson Inc. (HDI) on Wednesday cut its 2005 production and earnings targets and blamed bad spring weather for a 1 percent dip in first-quarter U.S. retail sales of its motorcycles, sending shares down 17 percent.
The warning overshadowed news of an 11 percent rise in quarterly earnings, and raised questions among analysts about the long-term growth outlook and strategy for Harley-Davidson.
"Management attributed the cuts to slow first-quarter sales, but we think the issue may run deeper than that," said RBC Capital analyst Ed Aaron. "We think Harley's underlying (production) growth rate is lower than either management or investors perceive."
Harley-Davidson, based in Milwaukee, said it would cut 2005 production by 10,000 shipments from its original forecast, and now targets shipment growth of 3.7 percent from a year ago.
The stock was down $9.99 at $48.78 on the New York Stock Exchange after forging the biggest fall in its history and hitting its lowest level in 15 months.
Chief Financial Officer and CEO Elect Jim Ziemer attributed the shortfall in U.S. retail motorcycle sales to weather and delayed warm spring temperatures and called the cuts a "precautionary measure."
"This action we are taking now to take out 10,000 units ... is a small adjustment to make sure we don't run into having too much carry-over product," Ziemer said in an interview. "It's not a reaction to bikes selling for less than (sticker price) or an economic concern."
Harley-Davidson has traditionally had a greater gap between supply and demand, but it has recently moved to narrow that and change the situation of the past when dealers charged more than sticker price and there were long waits for bikes.
When demand far outstripped supply in the past, small changes in the market did not cause Harley-Davidson to adjust production. But the company is more sensitive now, especially as the model year ends in two-and-a-half months, Ziemer said.
Analysts continued to seek other reasons for the productions cuts, raising questions about dealers' inventory levels and higher credit losses.
US Bancorp Piper Jaffray analyst Tony Gikas, who has a "market-perform" rating on the stock, said his checks with dealers suggested trends had been weakening for eight months.
"There is less confidence in forward bike sales, the level of dealers seeing bikes exceeding expectations is on the decline, and inventories were high," said Gikas. "Management is still overly optimistic on the longer-term opportunity ... and what the story lacked today was strategy."
For the first quarter, net income rose to $227.2 million, or 77 cents a share, from $204.6 million, or 68 cents a share, a year earlier -- topping analysts' estimates by a penny. Revenue climbed 6 percent to $1.24 billion.
During the quarter, annualized credit losses rose slightly above Harley-Davidson's target, due to a higher incidence of losses and lower recovery rates on repossessed bikes.
The company said its U.S. motorcycle retail sales fell short of its expectations, resulting in its decision to limit short-term production growth and cut its earnings growth outlook for the year to about 5 percent to 8 percent, down from its previous forecast of an increase in the mid-teens.
Analysts, on average, expected earnings before items to rise about 12 percent, according to Reuters Estimates.
Harley-Davidson cut its production target to 329,000 units, from its previous target of 339,000. That represented 3.7 percent growth from last year's 317,000 shipments rather than its previous forecast of nearly 7 percent growth. It expects almost all the production cuts to occur in the second quarter.
Ziemer, who said the company will continue to buy back shares, forecast lower second-quarter earnings from a year ago due to inefficiencies and disruptions in production.
Despite the cuts, he stood by the company's long-term unit growth projection of 7 to 9 percent, as well as its outlook for mid-teens earnings growth other than for this year even though it backed away from its 2007 target of 400,000 units.
"We are still seeing increases in demand but we are also seeing greater increases in supply," Gikas said. "I still think there are additional risks to production later this year and certainly to their outlook for 2006 and 2007."
Ted Parrish, a co-portfolio manager of Henssler Equity Fund, sold the fund's stake in Harley-Davidson earlier this month: "At this stage in the recovery, if and when consumers do decide to pullback on spending, a product considered somewhat upscale that is relying on the marginal consumer to step up to buy (it) is in jeopardy of having a slip-up like they just did."
Was he in a turn? Hitting something while in a turn can really mess you over.
Nope straight on but the bike lifted off the ground and the tire came down uneven. He was pulling wheelies at the next stop sign. The dude was nuts.
Those sport bikes come off the ground pretty easily. Nothing like my cruiser, which is pretty much glued to the road. I think my shadow is capable of 120, but it'd take a while to get there, and I have no inclination to do so.
Cha Ching! I personally own 5 bikes, not one a harley or cruiser.
There is a common denominator in all of my motorcycle purchases; Good value, high performance, excellent quality, and the ability to function as designed (not the least of which is an ability to manuever or turn , which Harley's don't do well without scrapping hard parts or levering the rear wheel and causing a lowside).
For example, I own an 03 YZF-R1 (commuter, 150+ bhp, 370 lbs), 03 CRF 450R (MX Weapon, 57+ bhp, 250 lbs, red sticker in CA :( though), 03 KTM 525 EX/C (dual sport, CA plated which is a miracle, 60+ bhp, 250 lbs), 03 XR50 (kids bike, but with lots of bling bling for Dad to ride), 04 LTZ400 (Quad, wife's, don't know the bhp or weight, but don't care cause I don't really ride).
So, as you can see, I have no vanity or social reason for buying a motorcycle, but I do have numerous, logical and performance/design related requirements.
For most Harley riders/owners, motorcycling is a fad. Anyone who thinks that loud pipes save lives or the highest priority is repealing helmet laws is a biker not a motorcyclist (and will be a former biker and former owner shortly).
I've had a $55,000.00 bucket of bolts come into my shop from some moron's shop in Fla. The steering head gusset off of the main tube was cracked, the gas tank was mounted with a sheet metal screw right into the top frame tube, the wiring harness was all "butt connected" and "scotch-locked" together, the small rod that connects the brake lever to the MC plunger literally fell out, leaving the customer with no front brakes.
I see that now a famous bike builder in the southwest is selling his "entry level" bikes for $47,000.00 For that money, you get no rear suspension, second rate forward controls...polished aluminum rims and a powdercoated oil tank that is supposed to match the candy colored frame, but doesn't. What a deal. All this for $47,000.00
I have a VERY wealthy customer who bought TWO $70,000.00 composites off of another builder out west. He was riding one of his bikes and the rear fender seperated from the frame and fell off the bike. It had been mounted using a "hidden strut" method and the brackets were actually made out of 18 guage sheetmetal. The idiot who built this bike should be drawn and quartered. My customer suffered VERY serious injuries to his testicles! Can you say OUCH?
Needless to say there is s multi million dollar lawsuit in the making. I saw one of these bikes before my customer bought it. I warned him. But WTF do I know? I've only been doing this for 15 years... long before the current crop of TV star motorcycle builders.....LOL
For the life of me I can not understand just how stupid some people are... to buy these things. I am in the business. I've been painting for almost 30 years...and painting motorcycles exclusively since 1988. I've had offers to "go into business" with quite a few of these "notable" bike builders. I stay clear of the majority of these people.
I am NOT slamming ALL of these people. Believe it or not... there ARE some real craftsmen out there. Your best bet is to look past the glam and talk to customers who have purchased bikes from these people. Make it a point to talk to customers with 20,000 or more miles on thier bikes.
Within the last few months... two motorcycle dealerships I do work for have been purchased by retired 50-ish ex Wall street brokers. All I can say is that I have met both of these people and both of them, thankfully...have been riding for years.... evidently... these people still think there is money to be made in this industry. I hope so. I'm riding this gravy train for as long as I can :)
...oh yea, I had a Norton 750 Commando with the "wrong side" shifter" in my office unrestored for years... I never got around to restoring it and finally got tired of looking at it in it's dilapidated shape. I sold it. I shouldn't have.
I'm eyeballing an 888 now. I've always wanted one ever since I saw Doug Polen in Daytona....
I'm kinda retro...and partial to torquey V-twins with low weight for street bikes...hence my addiction to Ducati's...and the occasional Buell.
This is not to say I do not like Jap sport bikes. I've done 165 on my 1990 FZR 1000. My first street scoot was an 88 FZR 400. I have nothing against Harleys... and kinda like the utilitarian Road King. I just rode the new 2005 R1. That thing will spank ya for sure if you're not careful... the one I rode had Micron exhaust and the Power commander done to it and was Dyno'd at 158 rwhp. It accelerates from 100 mph to 150 just as fast as from 40 to 100 mph.
It's a serious ride.
I'm gettin to old for that crap... you know how the saying goes..."the older I get, the faster I was".....LOL
I've never owned any Jap crap, and never will.
The interesting thing about the As Put Togeter motocycles (APT) is that many with more money than sense contiue to refer to them as "Harleys".
The vin number must have the "HD" in it for a motocycle to be a true harley. It is amazing what people will pay for an assembly of off the shelf parts and a fancy looking (not durable) paint job.
I don't know about that. I have an 11 year old who's counting the days until she's 16 and can ride a Harley of her own. I see lots and lots of riders in their late 20's early 30's these days. Much younger than that, and you probably can't afford one.
All motorcycles are reliable these days. Very little difference from bike to bike with the exception of the Goldwing. The wing alone has an exceptional duty cycle that dwarfs the rest of the crowd.
Most of us wave at everyone, even squids on squid bikes.
You're right. My first bike was a 50cc honda that my father bought me when I only 6 or so.
Nope. They used a 103B on one of their bikes, but that's the only Harley engine I've ever seen on an OCC bike. For the most part OCC uses S&S exclusively. Other chopper makers are fond of the Revtech engine. As a rule, those Evo clones are just that, clones of the Harley evo engine.
Yep. President Reagan saved an American Legend. It was a good call.
Like I tell everyone, when one of the Japanese manufacturers builds a cruiser I want to ride, I'll buy one. So far, nothing the Japanese make really interests me. The VTX 1800s are ok machines, but nothing about the bike excites me enough to switch.
Sure, and I wouldn't call either group, bikers. There have always been recreational riders, and there always will be. Good for them, they keep the motor companies in business. As for me, I ride year round. My motorcycle is my commuter vehicle, and in the Summer, I'll make two and sometimes three interestate trips. Bar hoppers and sport bikes just don't do what I want them to do.
I'd take a Confederate Hellcat over a Wraith any day of the week. If it was given to me, I would sell it in order to purchase the aforementioned Hellcat plus have a few bucks change.
~ Blue Jays ~
I get more utility out of my Harley than 99.99% of the owners of Jap bikes get from their bikes. I expect to cross 45,000 miles on my '03 this year.
It's a functional motorcycle. I personally wouldn't own one, but whatever makes you happy. More power to you.
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