Even the most exciting story in the world can get boring the eighteenth time around. And maybe that's just the problem at Harley-Davidson (NYSE:HDI). The stock opened slightly lower today to around $46 (12.5% below its 52-week high) despite the fact that the company reported record numbers for the fourth quarter and the full year of 2003, the 18th consecutive year of record growth.
For Q4, revenues were up 12.8% to $1.16 billion. Net income climbed nearly 21% to $182.4 million. That fueled a 22.4% increase in earnings per share, to $0.60 a stub. Things were also great for the year. Full 2003 revenues climbed 13% to $4.62 billion, while diluted earnings per share hit $2.50, a 31.6% jump over 2002.
With numbers like that, what's not to love?
That's the $14 billion question. While Harley's income has been shooting up like a weed for a long time, the stock price has stagnated in the $40s for most of 2003. The reason seems simple: Investors wonder how long Harley can continue to grow. Just how many motorcycles can it sell?
Harley answered that question this morning, saying it aimed to meet demand for 400,000 motorcycles per year by 2007. The company predicted upcoming earnings growth in the mid-teens, quite a drop from some of its more recent successes.
Harley has put off aging for quite a while, spending the past five years trading at price-to-earnings ratios north of 25. That's territory normally reserved for companies that don't have to perform capital-intensive operations like building motorcycles and factories. But middle age seems to be catching up, and as Harley's growth cools, so too has its stock price.
That's not to say that there's nothing left for investors at Harley. It commands what many consider the strongest brand name in the world. It remains an incredible cash generator (helped by profitable accessories and financing divisions). And given its history of increasing net margins and returns on equity of around 25%, Harley-Davidson could provide a stable long-term investment -- if you can get it at the right price.
Wondering which one of those shiny bikes you should take home? Ask the experts in the Fool's Harley-Davidson discussion board.
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