April 25, 2005 – Finance Digest
April 25, 2005
Filed under Features
Although Harley-Davidson, Inc. (HDI) recently reported record earnings of $227.2 million, or 77 cents per share, for its first quarter ended March 27, 2005 — up from $204.6 million, or 68 cents per share, in the prior-year period — the company says it expects second-quarter earnings to be lower than what it earned in the same quarter last year and cut its shipment and earnings forecasts for the remainder of 2005.
Shares of Milwaukee-based HDI fell $9.84, or 16.7%, to close at $48.93 on the New York Stock Exchange after the company announced its profit and production targets for the year. Share price dropped below its previous 52-week closing low of $52.30 and to its lowest level since January 2004.
Speaking to analysts, Jim Ziemer, HDI chief financial officer and chief executive officer-elect, said U.S. retail sales of Harley motorcycles were relatively flat during the first quarter and fell short of the company expectations. The result, he said, is a plan to decrease shipments by 10,000 units for the remainder of the year.
“Despite our continued optimism for the year, we feel it is prudent to limit short-term production growth, maintaining demand in excess of supply,” Ziemer said. “Our shipments are now planned to increase from last year’s 317,000 units to a target of 329,000 units compared to our original target of 339,000 units. Our 2005 earnings are expected to grow by approximately 5% to 8% in 2005 compared to our previous forecast of mid-teens earnings growth.
HDI says it believes the 10,000 unit reduction will occur almost entirely in the second quarter. Revised quarterly shipments are expected to be as follows: 77,000 units in the second quarter, 87,500 units in the third quarter and 87,500 units in the fourth quarter.
“While this volume adjustment may prevent us from attaining our previous goal of 400,000 units in 2007, we see no reason to change our long-term unit growth projection of 7% to 9% annually based on just three winter months of sales data,” Ziemer said. “Similarly, we are not changing our projection of mid-teens earnings growth other than for this year.”
Harley-Davidson’s first quarter revenue rose 5% to $1.24 billion from $1.17 billion a year ago.
First quarter revenue from motorcycles was $979.0 million, an increase of 6.5% over the first quarter last year. Worldwide shipments of Harley-Davidson motorcycles totaled 76,716 units, up 2,626 units or 3.5% over last year.
In the United States through March, Harley-Davidson retail motorcycle sales finished down approximately one percent compared to 2004. Worldwide retail bike sales grew 2.8%, driven by strong performance in Europe and Japan, which increased 20.6% and 10.6% respectively.
Jeffrey Bleustein, chairman and CEO of HDI, announced his retirement in December. Zeimer formally replaces Bleustein April 30. Bleustein will continue as chairman of Harley-Davidson’s board of directors.