Editor's Note: This piece has been revised to correct an error in the reported growth rate of finance debt.
I have to admit, I was surprised that the Street fell for it. Harley Davidson
My colleague Stephen Simpson described it as a mixed bag yesterday, but I'm even less sanguine. Here's the lead for my harsher version of the truth: The only reason Harley "beat" last year's quarter at all was that it bought back about a zillion shares. (Stephen did point this out. I want to underline it.)
Take a look at the percentage changes in our numbers breakdown, and you'll see much of what's got my plugs fouled. Sales inched up a scant 0.4% during a period when retailers across the price continuum, from Wal-Mart
Heck, even GM
And no, I'm not buying the "international" story. The release's cherry-picked 23% increase in the European market isn't well-contextualized. (A plunging dollar couldn't have hurt. What will happen now that the buck's back up?)
Shall we discuss the hefty increase in annualized credit losses, from 0.63% to 0.89%, for the first half of the year? You might want to consider what that ugly trend could mean when finance debt is up 5.3%. Again, please compare this to the meager sales increase.
Am I too big a worrywart? Stephen pointed out yesterday that brands like McDonald's
I'd say Harley is pretty richly priced for a company that's slowing at the top line. The P/E might look tasty, but don't be fooled by it -- or the big share buybacks. While the execs have been happy to spend a billion dollars of shareholder money on the shares, they still haven't dug into their own wallets.
I wonder, "Why not?" Could it be the stock's really not that cheap?
For related Foolishness:
- There's not much reason to be hog wild.
- Check Harley by the numbers.
- Was Harley a value after last quarter's drop?
- Review Harley's gnarly quarter.
- But things looked so good in July.
- Harley's back where it was more than a year ago, when I pondered its long road.
Seth Jayson switched from motorcycles to bicycles a few years ago so he could hear something other than muffler tunes. At the time of publication, he had positions in no company mentioned here. View his stock holdings and Fool profile here. Fool rules are here.