Harley-Davidson (NYSE:HOG) reported third-quarter revenue and earnings Tuesday morning that blew past analyst expectations.

The outsize performance was not predicated on higher motorcycle sales, but rather on cost-cutting. It suggests the effort to be a profitable, smaller operation has potential.

Man riding motorcycle under bridge

Image source: Harley-Davidson.

Ready to rev higher

Harley-Davidson generated revenue of $1.16 billion, an 8% drop from the $1.27 billion it made last year, but handily beat Wall Street estimates of just $884 million. Motorcycle revenue, though, was just $684 million versus $779 million last year.

Net income was $120.2 million, or $0.78 per share, compared to $86.6 million a year ago, or $0.55 a share. On an adjusted basis, Harley's earnings came in at $1.08 per share, easily surpassing last year's $0.70 and stomping analyst expectations of just $0.29 per share. The bike maker says it was its best third-quarter net income performance since 2015.

The gains, though, were made on the basis of significantly lower expenses as U.S. sales fell 10% versus the year ago. Harley's tax rate, for example, was around 10% this quarter compared with 26% last year.

While much better than the 27% decline experienced in the second quarter, it marks the 15th consecutive quarter that sales fell. The company partly blames the realignment of its new-year model introductions from August to the first quarter. 

It was a historically weak quarter, but Harley's declining fortunes have made it a very low bar to step over, and it was unable to do so.

The company is focusing on just 50 core markets while exiting more than 30. Yet it separately announced it would maintain a presence in India by selling its motorcycles through Hero MotoCorp, as was previously rumored.

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