Harley-Davison (HOG) reported solid second-quarter results Tuesday that showed strong retail motorcycle sales and solid earnings improvement. Sales of motorcycles and related products advanced 18% as US dealers sold 7.5% more new Harley-Davidson motorcycles in the period compared to last year’s quarter, marking the first year-over-year jump in the metric since the fourth quarter of 2006. Harley leveraged this sales growth into strong operating performance, with income from continuing operations increasing nearly 37% in the quarter. Its financial services segment also posted nice results thanks to ongoing improvement in credit performance and showed operating income expansion of nearly 35% from last year’s period.
Harley also upped its shipment forecast for 2011 and now expects to ship as many as 228,000 to 235,000 motorcycles during the year (was 215,000 to 228,000), a 12% increase from last year at the high end of the range. Further, the bike-maker raised the lower end of its expectations regarding gross margins to the range of 34% to 35% from 33.5% to 35%. Overall, Harley posted solid second-quarter performance, but the substantial pain it suffered during the height of the Great Recession remains all too fresh on our minds. In the current economic environment, we’d demand a greater margin of safety than what’s offered at its current share price in the mid-$40s before investing.
