Harley Jumps on Optimism for New Product Pipeline: Chicago Mover
Harley-Davidson Inc. (HOG), the biggest U.S. motorcycle maker, surged the most in 15 months after touting new models headed to dealerships by 2015.
The shares rose 6.3 percent to $46.26 at 11:24 a.m. in New York, after reaching $47.10 for the biggest intraday gain since July 2011. The Milwaukee-based company’s stock gained 12 percent this year through yesterday.
New bikes coming by 2015 will benefit from the company’s focus on the flagship Harley brand, Chief Executive Officer Keith Wandell said today. Product development had been hurt by lower revenue and other brands it owned. Wandell, who became CEO in 2009, sold the Buell and MV Agusta brands. Harley-Davidson has also cut its new-product development time to three years from five or six, he said.
“This is one of our biggest frustrations in the company: We’d like to have those products here today,” Wandell said on a conference call with analysts and investors. “All I can tell you is I think we are poised here. We’re more excited today about the array of products under development that we’re bringing to market, than maybe we’ve ever been in the history of our company.”
Net income for the maker of Super Glide and Night Rod motorcycles fell 27 percent to $134 million, or 59 cents a share, compared with $183.6 million, or 79 cents, a year earlier. Harley curbed production at its York, Pennsylvania, factory, its largest, to install a new production and planning software system. The average estimate of 13 analysts surveyed by Bloomberg was for profit of 58 cents a share.
Revenue excluding financial services fell 12 percent to $1.09 billion from the third quarter of 2011. Total sales declined 11 percent to $1.25 billion. The company gets about a third of its revenue from motorcycles and related products outside the U.S.
Harley has benefited from reduced costs through renegotiating labor contracts at factories in Pennsylvania and Wisconsin. Harley is “largely finished” revamping its production system, which gives it more flexibility, Wandell said today.
“The results are more products for all out our customers that have new and exciting innovation attached,” Wandell said in an interview.
Bikes such as the $7,999 Super Low, less pricey and easier to handle, are winning new riders, a group whose growth has outpaced increasing sales to traditional customers this year, Harley said today. The company hired Wandell from Johnson Controls Inc. (JCI), where he was the No. 2 executive, to revive operations.
Third-quarter gross margin widened to 34.7 percent of sales from 33.7 percent. Operating margin from motorcycles and related products fell to 13.3 percent from 14.7 percent. Harley today reaffirmed its forecast for annual gross margin of 34.75 percent and 35.75 percent.
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