What happened

Shares of Harley-Davidson (NYSE:HOG) jumped 20% on Tuesday morning after the motorcycle manufacturer reported third-quarter results that came in well ahead of expectations. There are some reasons for caution, but investors are focused on the positive after the strong release.

So what

Before markets opened on Tuesday, Harley-Davidson reported adjusted earnings of $1.05 per share on revenue of $1.17 billion, easily beating the Wall Street consensus estimate for $0.28 per share of earnings on revenue of $862 million.

A motorcycle on the open road.

Image source: Getty Images.

The company is under new management, and CEO Jochen Zeitz said in a statement that efforts to streamline operations and bring down dealer inventory were having a positive impact.

"We have started on our journey to become a high-performance company where business structure, leadership principles and our culture are all aligned," Zeitz said. "The platform we are creating will support the work ahead as we continue to develop and execute our new 5-year strategic plan."

Harley-Davidson said it intends to close about 60 dealerships, or about 4% of its total, as a way to focus on key markets.

Now what

The results were great, but investors should be careful not to read too much into them. Motorcycle revenue was actually down 10% year over year, and at least part of the earnings beat was due to a lower-than-expected tax rate and a boost in operating income at its financial services division due to a decrease in the provisions for loan loss.

Harley-Davidson also held off on providing any guidance due to uncertainty surrounding the pandemic.

The bottom line is things are going better than expected, but motorcycle sales are still under pressure. I'd like to see positive momentum in bike sales before I'd consider buying in.

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