Harley-Davidson (NYSE: HOG ) is enjoying the strong tailwinds that many other recreational vehicle manufacturers have had in recent periods. But is the company set to deliver alpha (stock-specific returns) in the long run? Harley had a big 2013 -- introducing several new bikes, launching a surge manufacturing strategy, and is set to continue releasing new products into this year. Still, Harley largely remains an old man's bike with a vintage appeal overseas. Will the company expand its horizons and continue its upward trajectory in stock price?
Making the moves
Last year's unveiling of Project Rushmore was ambitious and buzz-worthy. The company unveiled eight bikes that were technologically and mechanically superior to their predecessors, and had new styling updates. CEO Keith Wandell noted in the recent investor conference call that the company moved 28,000 of the new bikes from the August debut through the end of the year and that they were sold not only to the core white 50-plus-male demographic, but outreach customers as well.
The thing is, take a look at the Project Rushmore bikes. They have touchscreens and all sorts of bells and whistles that make them fantastic touring bikes, but are they going to resonate with new markets that the company needs in order to thrive in the long run? Today's 18- to 30-year-old demographic is more compelled by the sleek lines of an uncomfortable Ducati or a vintage cafe racer. For Harley to continue its resurgence in the United States, it needs to reach out beyond its core market in a material manner.
Coming up next for the company are two street bikes aimed at accomplishing just that. The Street 500 and 750 are urban bikes that are meant to warm younger people to the Harley brand. Furthermore, these lighter, thinner, stop-and-go bikes should resonate better in the company's foreign markets where motorcycles are not just toys but substantial transportation alternatives.
Management has data that suggests Harley's image among its outreach customers is far better than what is said above. In 2013, the company found twice the sales growth in these demographics than it did in its core: the 18-34 age group, women, African Americans, and Hispanics. While this is a substantial figure, investors should keep in mind that tiny numbers are relatively easy to double.
In the fourth quarter, the company's U.S. retail sales grew 6.3%. Though it included the push from August's Project Rushmore release, it was still less than 2012's fourth-quarter-sales growth of 8.4%.
Harley has good momentum (and press) going into 2014. Its Street bikes should help push sales in the near term, and hopefully the company can carry into its sixth-consecutive year of market-share gains.
But investors should be aware of the hype, here. It's a good company with good management. The stock seems fairly valued (not cheap but not too expensive), and the company should easily post more good news in the coming quarters. But while analysts and investors rave about the company, the somewhat standard sales growth tells a slightly less interesting story.
Harley-Davidson is having a good run, just don't let the rush get to your head.
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