Harley-Davidson Posts Disappointing 2005 Goals
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Harley-Davidson Inc. (HDI) reported a 20 percent rise in quarterly earnings on Wednesday, but its shares fell on a sharp drop in U.S. retail motorcycle sales and a lower-than-expected production goal for 2005.
The Milwaukee-based company blamed the retail sales drop on tough comparisons with a year ago, when the company's 100th anniversary celebration lifted retail sales by 27 percent, as well as hurricanes that hit the U.S. Southeast.
Some analysts focused on production. Harley-Davidson estimated it will ship 339,000 motorcycles in 2005, an increase of 7 percent from the projected 2004 total. The company has targeted long-term annual growth of 7 percent to 9 percent.
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"The '05 guidance means that Harley-Davidson would have to grow production at a higher ... rate of 8.6 percent in 2006-2007 to hit its target of 400,000 units in 2007," Robin Farley, an analyst with UBS Securities, wrote in a research note. She has a "buy" rating on the stock.
Third-quarter net income rose to $229 million, or 77 cents a share, from $190.1 million, or 62 cents a share, a year earlier.
Analysts' earnings forecasts ranged from 73 cents to 78 cents a share and averaged 75 cents, according to Reuters Estimates.
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Analysts said margins made the difference. Gross margins widened to 38.0 percent from 35.6 percent a year earlier, while operating margins widened to 23.6 percent from 21.3 percent.
Harley-Davidson credited the integration of its new plant in York, Pa., and other efficiencies, as well as the weak dollar.
Revenue increased almost 15 percent to $1.30 billion from $1.13 billion a year earlier.
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Sales of Harley-Davidson-brand motorcycles totaled $996.6 million during the quarter, an increase of 18 percent. Buell motorcycle (search) sales declined to $18.3 million from $20.5 million.
The company said U.S. retail sales of Harley-Davidson motorcycles declined 9.8 percent from a year ago. Analysts said the decline for the entire industry was 2.3 percent.
Harley-Davidson said its 2005 production target, for a 7 percent increase, is warranted, given some of the weakness in its international markets.
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The company said demand has been strong in Canada, France, Britain, Spain and Italy, but weak in Japan and Germany.
Harley-Davidson shares were down $1.40, or 2.3 percent, at $58.34 on the New York Stock Exchange (search) after falling as low as $57.71 earlier.