Going Whole Hog at Harley

By Gene G. Marcial

If you think winter is the time to buy straw hats, now may be the season to buy shares of Harley-Davidson (HDI ), too. Motorcycle sales fall off in cold weather, but they have been hit especially hard by this year's icy blasts. The stock has also been pounded, with 16.3 million shares sold short. But Joe Yurman of Bear Stearns (BSC ) says there's no erosion in fundamentals to justify the drop from October's 55 to December's 45. Harley has since risen to 47.36, and he sees it at 60 or 62 in a year.

"Demand for Harley's bikes remains strong," says Yurman, who backs the stock for the long haul. He says Harley will roll out new products for the young crowd in 2003-04 as part of its 100th-year celebration, and will surprise the bears with new features on its road bikes. Yurman sees sales of $4.5 billion in 2003, up from $4 billion in 2002 and $3.4 billion in 2001, and earnings of $2.15 a share in 2003, up from 2002's $1.83 and 2001's $1.43. Joseph Hovorka of Raymond James & Associates (RJF ) rates Harley a strong buy, based on free cash flow and annual earnings growth of 23% since 1991.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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