Harley-Davidson profit report tops estimates despite production woes

Harley-Davidson shares rose the most in five months after second-quarter profit and revenue beat estimates, a sign that Chief Executive Officer Jochen Zeitz’s turnaround plan is helping the motorcycle maker overcome supply-chain headaches and a temporary production shutdown.

The Milwaukee-based company posted earnings of $1.46 a share, well over the $1.02 average of analysts’ estimates compiled by Bloomberg. Revenue from motorcycles and related products rose to $1.27 billion, compared with the $1.25 billion forecast by analysts. Harley shares rose 6.7% at 10:10 a.m. in New York and earlier gained 10%, the most on an intraday basis since early February.

Zeitz, a former Puma SE executive who took the helm of the troubled manufacturer in February 2020, has slashed costs, exited unprofitable markets and tightened inventory to raise motorcycle prices as part of his “Hardwire” turnaround plan. While he’s successfully introduced new models and mopped up excess bike inventory, shipping bottlenecks and parts shortages have constrained sales growth coming out of the pandemic.

The profit beat came even as global sales of motorcycles fell to 50,500, down 23% from the year-earlier quarter. Sales by that measure were down 28%, to 34,900, in North America, Harley’s largest market. Europe fell 15%, Latin America dropped 8%, and sales in Asia rose about 1%.

“Demand was strong across the board, but the available bikes in the dealership were the concern,” Zeitz said on a call with analysts. Harley struggled to ship what it had to dealers, he said.

Harley was forced to halt production and shipments for two weeks in May and June because of a “regulatory compliance matter” with a part from one of its suppliers. At the time, Harley told investors it would be able to make up for lost production in the second half of 2022.

Zeitz also is culling dealerships in the U.S. and clawed back a portion of dealer profits on certain models earlier this year, a move that could help shore up profit margins, according to UBS AG.

Harley maintained its forecast of 5% to 10% revenue growth in 2022, and operating income margin of 11% to 12%.

Related video: