Harley Davidson riding high on strong sales

The iconic motorcycle maker benfits from refocused product development and revamped dealership network.

By Trefis Jan 27, 2012 2:40PM
Image: Highway through prairie (© Comstock Images/Jupiterimages)Harley Davidson's (HOG) worldwide motorcycle retail sales increased by 10.9% in the fourth quarter, compared to the same quarter the year before. In the U.S., sales climbed 11.8%. The company's income from continuing operations in the quarter was $54.6 million, compared to a loss of $42.1 million for the same period last year. Its gross margins rose from 29.6% to 31.2%, while operating income posted an increase of $42.3 million.

All this has been possible because of Harley's commitment to refocusing its product development, reducing inefficiencies, and speeding time to market. 


Harley's sales have also been helped by the fact that the company is revamping its dealership system, working to provide a superior customer experience and improve dealer profitability. It is also planning to launch an online portal as an alternative avenue for motorcycle sales.


However, the biggest sales driver has been the expansion of Harley internationally. In the past year, it has opened over 35 dealerships in high-growth international markets, which will help ensure future growth for the motorcycle giant.


Harley Davidson competes with other major motorcycle manufacturers like Honda Motor Company (HMC), Kawasaki Heavy Industries and Yamaha Motors.


Harley's resurgence in the U.S. has been driven by improved customer confidence, which was a result of a combined effort by the company and its dealers. The dealers sold 23,753 new Harley-Davidson motorcycles in the U.S. -- 11.8% more than the fourth quarter of 2010. For the full year, sales in the U.S. touched 151,683 units, a 5.8% increase over the prior year. This was also helped by growth in the industry of heavyweight motorcycles (651 cc+), sales, which picked up by 4.3% in 2011. Harley's market share in the U.S. was 59.4% for the fourth quarter and 55.7% for the full year.


Harley Davidson US Market Share

Harley's international sales also increased, reaching 16,606 units in the fourth quarter, an increase of 9.7%. For the full year, motorcycle sales hit 83,505 units, a 6.1% increase over 2010.


Harley's focus on emerging countries in Asia and Latin America yielded dividends as these regions recorded a huge growth in sales. Latin America saw a 17.5% jump in sales, which was helped by improved sales in Mexico and a revamping of operations in Brazil. India is also becoming a lucrative market with considerable consumer interest.


Harley Davidson Rest of World Heavyweight Motorcycle Sales

The company's financial services recorded a 30.7% jump in operating income as a result of improved credit performance. This is a lesson that Harley is carrying back from the subprime crisis, which punished almost all lenders with bad assets and huge balance sheets. For the full year, operating income from financial services was $268.8 million, an increase of 47% from 2010.


Harley Davidson Financial Service EBITDA Margin

We currently have a Trefis price estimate of $41 for Harley Davidson's stock, which is around 8% below the current market price. We are in the process of updating our estimates post Q4 earnings. See our full analysis of HOG here.

Tags: HMCHOG
24Comments
avatar
Hey numbnuts, the interest rate is based on your credit score. Apparently yours sucks.
Jan 27, 2012 7:57PM
avatar

And a not so quick retort to td49: I thought the same thing until I compared price to price.  Harley warranties plus the service and longevity of the bike, not to mention resale values are well worth a few hundred extra dollars for a similar sized metric bike.

 

A Fat Boy (which I purchased) was only about $1200 more than the M109R I set out to buy, and the book value is only about $400 less than I paid for it a full year later with after I have put over 15K miles on it.  I can drive my $16K bike for 10 years and get $12K-$15K out of it when I sell it (check it out yourself on dealer websites and NADA/Black Book/ Blue Book).  In comparison, a new top-of-the-line Suzuki M109R Limited Edition sells for almost $16 and trade in value a year later is an abismal 60-65% of purhased value in perfect condition.

 

Bottom line?  You get what you pay for.  If you want a cheap bike to ride and throw away, by all means, go metric.  If you want an investment that will go 100-150 thousand miles reliably before even considering it to be broken in, Harley is the only way to go.  I have owned literally dozens of bikes and fell for the anti-HD stuff as well, but after thoughtful reflection I don't think I have ever had a metric bike of any brand rack up over 30-40K miles before either serious or costly issues developed. (Yes, Dad - even your precious Hondas have disappointed me on more than one occasion.  Remember the GoldWing fiasco after you INSISTED? Ha!  Yes, some bike that P.O.S. was!)

 

As stated in my other post, I am hooked!

Jan 27, 2012 9:16PM
avatar
I suggest you take a closer look at these 'American made' bikes. The HD I was considering buying last year was as follows: front forks-made in Japan, pistons-made in Austria, wire harness-made in Mexico, chroming-done in Canada.etc.etc.
The reason HD has become profitable again is that is farming out its components to cheaper labor markets. So if you like to ride a Harley is one thing...but don't think your buying American.

Jan 27, 2012 7:13PM
avatar
td49 - just because you do not appreciate motorcycles does not mean they are overpriced, just as with everything else you get what you pay for. HD is the best made, best backed motorcycle made.
Jan 27, 2012 7:10PM
avatar
Harley is way overpriced,

Are you referring to the stock or its Motorcycles?

 

In any case yes the P/E is a little high but with sales growth of 9%    and Income Growth of 111%  and a Dividend to boot , still looks like a good stock to me.

Jan 27, 2012 7:40PM
avatar

I for one, am a recent convert to Harley-Davidson motorcycles.  Having been a rider since the day after I got my regular driver's license, I had always ridden metrics.  Hondas, Yamaha, Suzuki-Kawasaki (hyphenated because since the 90s they are the exact same bikes with few exceptions, sharing parts on almost every model), and even  Ducati and Moto Guzzi - I have had them all.  Until last year, what I had never owned was a Harley. 

 

After heading out to purchase a Suzuki M109R I took a look at the dealers around my area and saw a beautiful Fat Boy and after a few blocks on the back of it knew I was hooked.  Better than the bike is the incredible service, where everyone from my salesman to the parts counter, clothing, and service folks knows me by name and bike, even a year after I bought it!  The service prices are cheaper than most metric shops in contrast to rumor and speculation.  Based on my own experience, I can truly say all of it has significant contributory effects on how Harley is growing!

 

If American auto makers ditched the labor unions, went to an employee-owned structure and took some pride in their jobs and changed the way they did business from design to the sales floor like Harley has, I would dare say they would see a tremendous increase in business as well.

Jan 27, 2012 6:44PM
avatar
td49 - so is Apple, but it's not the point of the article.  I guess both have a loyal following who see some kind of value in what they're paying.
Jan 27, 2012 6:38PM
Jan 27, 2012 8:10PM
avatar
robfam6dad  - I am glad you had a great experience with your purchase, and welcome to the HD family. It is folks like you who are realizing the value and dependability of the HD line are second to none that keep  HD going strong! Thank you for helping to keep our friends, family and neighbors employed.
Jan 27, 2012 6:30PM
avatar
Numbnuts doesnt even begin to describe Mr. Jones.
Jan 28, 2012 2:14PM
avatar
Really something reading about all putting down Harley Davidsons and going out buying metric bikes, bet your the same ones complaining about jobs and the economy..most of the time hate for Harleys is just a bias opinion not because of the product cause don't really have any experience or knowlege of the product. I know a lot people that are Harley haters just because there are so many out there, but no matter what anyone says they are American, they do put Americans to work...keep buying your metrics but don't complain about jobs or economy..
Jan 27, 2012 8:48PM
avatar
I have had Harleys in the past but I now ride an 2001 Indian Scout.  There are so many Harleys out on the rode.  Indian is American Made and was first made in 1901.  They have had their problems in the past but would not ride anything else.

Jan 27, 2012 8:29PM
avatar
I'm with you, Robfam6dad, Harley D has been the only bike i have ever wanted. they are the best! They are an American product, none can beat the long history. Ride American! Buy American! Take the rice burners back across the pond.
Jan 27, 2012 9:15PM
avatar
had 2005 ultra put 40,000 miles on it try to sell for 2 years gave it away now i have 2010 goldwing best move ever.go look at the parts on your harley made in taiwan
Jan 27, 2012 6:37PM
avatar

Just curious, are the boards here set up for the purpose of berating everyone who asks a question?

 

George Jones - Harley's base rate is about 9.5%, so at 11, you're being asked to pay 1-1/2% more than their going rate.  What the others are saying is basically true, I just took issue with the way they are saying it (they're probably snotty, elitist MSNBC watchers).  It either has to do with your credit rating, or some other risk, maybe the particular model you bought. You're not too much of a risk, or you'd be paying a lot more.

Jan 28, 2012 7:00PM
avatar
my 2010 wing was made in the usa by americans
Jan 31, 2012 3:42PM
avatar

If it is NOT built in the USA I just do not buy it ! and when everyone else does the same and looks at the labels and stops buying companies will be coming back to the US and not Asia to build the products. 

with gas heading to $4 + a gallon very quick bikes will be plentlful on the streets.  Why is it that the oil companines know a year or so in advance what the gas prices will be in 12 months into the future?  Seems they need some regulation, quickly...

Dump this congress and house members for some new poorer ones who worry about everyone else and not the welathy.

May 30, 2012 6:03PM
avatar
My first bike was a H-D in 1977 when there were not a lot of Harleys being bought. I had three and stopped riding H-D in 1993. It was that yr they were out of my financial reach.The co. told their franchises to renovate their businesses to look like boutiques. If you didn't ,your franchise was lifted. Due to their large increases I stopped. Then came the people who never rode before and wanted to be in the Harley family to be noticed or for the apparel. They came and went. Harley stock went thru some pressure after the economy took a ****. They are the best for resale but were not intended to be a fast bike and never will be until they run double over head cams. Check out the NHRA Pro Stock bike class and see what the Eddie Krawics and Hines are riding to get that speed. Harley was for styling, sound and appearance only. I don't like them too much anymore because their appearance doesn't excite me especially the V-Rod.
Jan 27, 2012 10:19PM
avatar
I've owned three Harley Davidson motorcycles.  They have the best paint and today are better than they have ever been.  But, they are slow, heavy, uninspired relics.  Today I own two motorcycles, a BMW r1200GSA and a Honda ST1300.  The BMW is light weight, versatile, ugly and a strangely inspiring machine.  The Honda is a no nonsense 150 mph+ right off the show room floor medium high performance machine. (medium performance for honda, unobtainable for Harley)   For HD to really compete on any level other than style and giving accountants some since of being a bad boy is just plane silly.
Jan 27, 2012 9:06PM
avatar
HARLEY D  MOTOR CYCLE IS IN DEED A WONDERFUL PIECE OF MACHINERY. I BELIEVE WE SHOULD BUY AMERICAN .  MY EXPERIENCE WITH THE DEALER SERVICE WARRANTY SUCKS . THIS IS MY FIRST HD BIKE. I WOULD LOVE TO TALK TO HD AND REALLY LET THEM KNOW HOW I WAS TREATED. THE BUYING EXPERIENCE WAS WONDERFUL MY SALES GUY WAS GREAT , MY NEXT BIKE WILL ONLY BE HD.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

113
113 rated 1
279
279 rated 2
416
416 rated 3
647
647 rated 4
548
548 rated 5
513
513 rated 6
669
669 rated 7
516
516 rated 8
317
317 rated 9
113
113 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
KOGKODIAK OIL & GAS Corp10
UPLULTRA PETROLEUM Corp10
TAT&T Inc9
COPCONOCOPHILLIPS9
DVNDEVON ENERGY CORPORATION9
More

VIDEO ON MSN MONEY

ABOUT

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.