Harley-Davidson 2Q Earnings Top Street, But Shares Slump on Sales Concerns

Harley-Davidson (NYSE:HOG) reported a better-than-expected 30% increase in earnings and stronger sales on Wednesday but the shares fell on the company's cautious outlook and concerns that demand for motorcycles would fall in the current period.

The motorcycle and accessories maker expects to ship between 51,000 and 56,000 bikes in the third quarter, which represents a decline of 9.3% to 17.4% from the same year-earlier period.

The guidance is consistent with an earlier disclosure of softer sales in this year’s third and fourth quarters due to the implementation of its ERP production and planning system in York, Pa., that is expected to boost manufacturing capacity.

For the full year, Harley expects to ship 245,000 to 250,000, representing a year-over-year increase of 5% to 7%.

“We continue to remain cautious in our expectations for retail sales globally in an environment of greater economic uncertainty, including in Europe where sales are clearly being affected by the challenging euro zone economy," Harley CEO Keith Wandell said in a statement.

Shares of Harley shot down 10% Wednesday but have since rebounded. They are currently sitting about 4% lower to $41.50, but remain up about 7% since January.

The motorcycle maker reported net income of $247.2 million, or $1.08 a share, compared with a year-earlier $190.58 million, or 81 cents. Excluding one-time items, Harley earned $1.07, topping average analyst estimates in a Thomson Reuters poll by two cents.

Revenue for the three months ended July 1 climbed 14.6% to $1.73 billion from $1.51 billion a year ago, beating the Street’s view of $1.63 billion. Dealers worldwide sold 85,714 new Harley bikes, up 2.8% from a year ago. Sales in the U.S. climbed 4%.

"As expected, retail sales moderated in the second quarter due to an unusually warm early spring in the U.S. that pulled some sales forward into the first quarter,” Wendell said.

Harley, which has been undergoing a massive overhaul since 2009, incurred restructuring charges of $6.2 million during the quarter. Upon completion of the turnaround in 2013, Harley expects restructuring activities to result in one-time overall costs of $490 million to $510 million, about $10 million less than an earlier estimate.

In 2012, total restructuring costs are expected to be in the range of $40 million to $50 million, below its earlier estimate of $50 million to $60 million.

The overhaul is expected to save some $275 million to $295 million this year and $315 million to $335 million annually starting in 2014.