Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Harley-Davidson Stock Plunged Today

By Steve Symington - Updated Apr 23, 2019 at 11:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

From falling sales to higher tariff and recall costs, the iconic motorcycle company had a bumpy ride to end 2018.

What happened

Shares of Harley-Davidson ( HOG 0.00% ) were down 6.5% as of 2:30 p.m. EST Tuesday, after the motorcycle manufacturer announced disappointing fourth-quarter 2018 results.

More specifically, Harley's quarterly revenue declined 8.7% year over year to $955.6 million, translating to adjusted (non-GAAP) net income of $28 million, or $0.17 per share. Analysts, on average, were anticipating earnings of $0.28 per share on revenue of $1.05 billion.

Man riding a Harley-Davidson Softail Low Rider

IMAGE SOURCE: HARLEY-DAVIDSON.

So what

Harley's worldwide motorcycle sales fell 6.7% during the quarter, to 39,311 vehicles. But its weakness was the most pronounced in its core U.S. market, where motorcycle sales declined 10.1% to 20,849 vehicles. On the top line, revenue from Harley's motorcycle segment declined 6.6% this quarter to $738.2 million, parts and accessories sales dropped 15% to $142.2 million, and general merchandise revenue fell 18% to $58.4 million.

But if Harley's struggle to find growth wasn't enough, during the subsequent conference call management revealed that tariff costs this quarter climbed by $13.4 million, including increases in both the EU and China. Harley also took a $55 million hit this quarter under its selling, general, and administrative expenses, related to two voluntary recalls.

Now what

Harley plans to accelerate its "More Roads to Harley-Davidson" initiative in an effort to pull in 2 million new riders in the U.S., bring international sales to 50% of its total volume, and launch 100 new "high impact" motorcycle models by 2027.

In the meantime, Harley expects to ship 217,000 to 222,000 motorcycles in 2019 -- down from just over 228,000 in 2018 -- including 53,000 to 58,000 in the first quarter.

In the end, Harley might well be taking all the right steps to return to sustained, profitable growth in the coming years. But given its relative underperformance to end 2018, and another expected decline in shipments this year, it's no surprise to see the stock falling today.

Check out the latest Harley-Davidson earnings call transcript.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Harley-Davidson, Inc. Stock Quote
Harley-Davidson, Inc.
HOG
$36.63 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
656%
 
S&P 500 Returns
144%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/02/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.