Harley-Davidson dives on chopped guidance
Even though the motorcycle maker had a solid quarter, concerns about margins hit the stock hard.
Updated: 6 p.m. ET
Blame the $8,000 SuperLow for whacking Harley-Davidson (HOG) stock Tuesday.
Even though the company had a good third quarter, with profit more than doubling, a shift to producing cheaper bikes like the SuperLow worried investors. Those bikes aren't as profitable, and gross margin in the quarter narrowed to 33.7% from 34.9% a year earlier.
Gross margin was the main reason the stock ate dirt Tuesday even after solid quarterly earnings. Harley lowered its full-year guidance on gross margin to between 33.5% and 34.5%. That's a mere 0.5% less than before, but it was enough for shares to close at $34.59, down 7%.
Another reason for the guidance change was uncertainty related to currency exchange rates, the company said. A rising U.S. dollar can hurt overseas sales.
Investor reaction seemed a little dramatic, considering that the shift to lower-priced Sportsters is just temporary. Harley is overhauling its Pennsylvania plant that makes high-end motorcycles such as the Touring and Custom models, Bloomberg reports.
That plant is going from four lines to one, and that one line isn't at full speed yet. So there aren't as many expensive bikes being made right now.
Check out the following interview with Harley's chief executive.
Post continues below.
Harley beat analyst expectations on profit for the quarter ended Sept. 25 but fell a bit short on revenue. Profit rose 107% to $183.6 million, or 78 cents a share. Analysts were expecting 76 cents.
Sales rose 13% to $1.23 billion, less than the $1.28 billion analysts were looking for. In the U.S., the company's largest market, retail sales were up 5.4%. And Harley stuck by its previous forecast of shipping 228,000 to 235,000 motorcycles this year -- about 8% to 12% more than in 2010.
The numbers coming from the company seemed a little contradictory, and some analysts were a little confused Tuesday. "We struggle to understand how gross margins would be down year over year with shipments up 16% and manufacturing savings presumably coming through," wrote one RBC Capital Markets analyst, according to Reuters.
I recently had a rear left tail light go out on an $8000 Harley go out on me after about a month of owning it and not only did they replace it for me for free, they adjusted my clutch while they were at it (the bike wasn't shifting as smoothly as I would have liked)...also for free. They also asked me to call them back to let them know how the adjustment was working out for me...ended up working out great.
Maybe that will change after the warranty expires...I don't know. All I know is when I walk into the shop in Oakland, the folks remember me there and what bike I own, they help me with any problems I have...they don't try to up-sell me and they seem to genuinely want to know if I'm happy with any work they've done, the bike, etc. It's been a very positive experience and I bought one of the least expensive bikes they make.
Well I have taken the time to browse most of the posts. The one thing that everyone fails to realize is the product and where it is produced. As a man that has previous and/ or currently had a 66, 74, 79, 86, 2005, 2006 Harley in his garage at any given time it boils down to one most important thing. They are made in the USA. R.U.B.s, 1%'s, Independents, and the weekend warriors all tend to say the same common thing. It is still built here in our country. I agree a bit pricy. I agree they are coming down n value. Simple reason for that is new product and age bring down old product pricing. Look at any manufacturer. Honda, Kawasaki, Yamaha, Suzuki.
The problem with our country and the financial whoa's we all face are the same across the board. Lack of work! Lack of Money! And lack of a controlled government. Just saying....
I work, I struggle, I ride.
If HARLEY wants to stay as in as one of the top companies in the Motorcycle business they must lower the prices! I'v never had one But I deff want to get one in the future! but with those crazyyyyy insane prices! it would be a NO CAN DO!!! for the majority of Americans!....
Not knowing squat about it, I looked it up online. Not only was it my favorite bike in terms of style (I also like the Fat Boy Low and the Soft Tail Deluxe) it was one of their least expensive. I felt like I hit the jackpot.
I've had it about a couple of months now and having never rode before (I had a class C license but I don't like driving cars...took the Harley Davidson Rider's Edge course...very helpful) I have to say it's been one of the greatest experiences of my life for a variety of reasons. I hope they keep making bikes in this price range for folks like me who were looking for a more classic styled bike that's American made for their first riding experience.
And you have to buy the matching costumes, otherwise a Harley owner looks like a dweeb. How do I know all this? Because after owning BMWs and Hondas for 30 years, I bought my first Harley. Yes, I've sipped the Kool-aid. Most Harley riders (and bike riders in general) are good people and are fun to be with.
Owning a Harley is a choice, just like any other. I would like to see Harley, and any other American manufacturer succeed. Do your part. Buy one.
Don't know what neighborhood your in but right now I'm seeing smoking deals on used Harley's. And Sportsters are going in the hood of $3500-$4500. Then even if you do spend $4K on accesories you never get half that back. Accesories don't hold value plus if you ever flipped over the package of a chrome piece in the Harley store you'll see its not always made in america, but china or somewhere else. Allot of the t-shirts are coming out of Indonesia,Malaysia and India.
But I'd still buy a Harley,just not at retail cost, I'd buy a used one since most are bought for posing anyway and have low miles..That Kawasaki Drifter sure looks sweet for a rice burner.
For $18K-$20K in my book it better have a toilet and a kitchen. I keep my spending for toys way below that.
Copyright © 2014 Microsoft. All rights reserved.
These hot movers could rise by double digits in coming months.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.