Harley-Davidson Jumps on Boost From New Engine, Cost Reductions

  • Shares rise as much as 7.4 percent, most intraday since July
  • Company reaffirms annual shipment goal despite U.S. weakness

Harley-Davidson Inc. climbed the most since July as the motorcycle maker said that its new engine is boosting sales despite a weak U.S. market and that the company is trimming jobs as part of a cost-cutting plan.

The Milwaukee-Eight engine helped generate sales gains in September in the U.S., where Harley has struggled amid heightened competition and an industry slump, Chief Executive Officer Matthew Levatich said on an earnings conference call Tuesday. Harley’s third-quarter sales and profit matched analysts’ estimates and the Milwaukee-based company reaffirmed its annual global shipments forecast of as many as 269,000 motorcycles.

“Implied retail sales for the fourth quarter are much stronger than those of recent quarters, and management commentary regarding the reception of Harley’s new Milwaukee-Eight engine was very positive, which bodes incrementally well for fourth quarter and fiscal year 2017 results,” David Beckel, an analyst at Sanford C. Bernstein & Co., said in an e-mail. He rates the company’s shares outperform.

The stock rose 8.9 percent to $54.13 at 2:15 p.m. in New York after surging as much as 9.1 percent, the most intraday since July 29. The shares were up 9.5 percent this year through Monday, outperforming the Standard & Poor’s 500’s 4 percent gain.

Harley’s third-quarter revenue from U.S. retail motorcycle sales tumbled 9.1 percent, as shipments fell 13 percent. The company said in a statement that it would streamline its business because of the “challenging U.S. industry,” including an unspecified number of job cuts. The reorganization will result in costs of $20 million to $25 million this quarter and lead to savings of $30 million to $35 million into next year, Levatich said on the call.

Levatich said that with the initial impact on demand from the new engine, “we’re confident that the entire lineup will drive our retail sales for the remainder of 2016 and position us well heading into the spring riding season and beyond.”

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