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Harley-Davidson Revs Up on a Mixed Market Day; BP Loses Energy

By Dan Caplinger – Oct 27, 2020 at 12:40PM

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Earnings had a positive influence on many stocks Tuesday.

The stock market was narrowly mixed on Tuesday, reflecting the high level of uncertainty among market participants. With a week to go until the U.S. presidential election and adverse trends in COVID-19 cases showing up around the world, investors appear to be on edge as they consider what the future will bring. Shortly after 11 a.m. EDT, the Dow Jones Industrial Average (^DJI 0.08%) was down 79 points to 27,606. However, the S&P 500 (^GSPC 0.25%) managed to inch higher by 2 points to 3,403, and the Nasdaq Composite (^IXIC 0.95%) gained 81 points to 11,440.

Earnings season continued to drive performance among individual stocks, and the latest financial reports from some key companies contributed to the crosscurrents in the market. Harley-Davidson (HOG 2.47%) saw its stock soar after the motorcycle giant released its earnings numbers, but energy behemoth BP (BP 0.19%) just barely managed to avoid posting a net loss, sending its shares a bit lower Tuesday morning.

High on the hog

Harley-Davidson's shares were higher by 27% on Tuesday morning. The motorcycle king's third-quarter financial report inspired shareholders to be more optimistic about the company's prospects.

White motorcycle in front of Los Angeles skyline

Image source: Harley-Davidson.

Harley-Davidson's numbers had a lot for investors to like. Revenue was down year over year, but only by 8%, reflecting a bounce from weaker conditions earlier in the year. More importantly, net income jumped 39% from the year-ago period, sending earnings per share up by half.

Even with the COVID-19 pandemic continuing to rage, unit sales numbers weren't terrible. North American motorcycle sales dropped 11%, but volume was higher by 7% in Europe, helping to limit global sales declines to 8% on a unit basis. In addition, parts and accessories sales were up year over year.

CEO Jochen Zeitz went into great detail about Harley-Davidson's strategic restructuring efforts, as the company aims to promote a high-performance culture. The goal is to preserve the Harley-Davidson legend and stand for what the company calls "the timeless pursuit of adventure."

Those efforts appear successful thus far, as used motorcycle prices have picked up and new sales are coming in right at the manufacturer's suggested retail price in the third quarter. With inventories down considerably, Harley-Davidson could see a nice ramp-up into the holiday season.

BP ekes out a profit

Meanwhile, shares of BP were lower by 2%. The British oil company managed to push a key metric back into the black, but that didn't eliminate investor concerns about long-term sustainability.

BP reported a replacement cost profit of $87 million for the third quarter. That was down sharply from $2.3 billion a year ago, but it compared favorably with BP's huge $6.7 billion loss in the second quarter of 2020. Operating cash flow was reasonably healthy at $5.3 billion, although the figure was down about 18% year over year.

The company reported a number of efforts to make it through the current low-price environment in energy markets. BP reported considerable progress toward its $2.5 billion annual cost-cutting goal, along with further asset sales toward the end goal of reaching $25 billion in divestitures by 2025. Even with the cash conservation efforts, BP still managed to spend $9.1 billion on capital expenditures, showing that it continues to develop what it's held as its core assets.

Oil and gas markets remain under pressure, and BP hasn't been immune from the downdraft in energy stocks. Nevertheless, it's better for BP to be making tiny amounts of money than seeing the big losses it suffered earlier this year.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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