Harley-Davidson Speeds Past Earnings Estimates; Shares Up 14%

Shares of Harley-Davidson surged 14% in early trading on October 27 after the motorcycle maker announced beats on both the top and bottom lines.

For Q3, Harley-Davidson (HOG) posted revenue of $964.03 million, beating the consensus estimate by $110.32 million. Non-GAAP EPS came in at $1.05, $0.77 above the Street’s forecast. Gross margin rate of 29.8% also exceeded the 27.2% consensus estimate.

According to management, this strong performance highlights the progress of “The Rewire,” the overhaul of its business. As part of these efforts, the company will utilize a new operating model designed to reduce costs and increase focus on profitable products and markets.

“We have driven significant progress across each key element of The Rewire playbook, and we believe the positive changes we have executed are setting our course for a winning future,” Harley-Davidson’s chairman, president and CEO Jochen Zeitz stated. “We have started on our journey to become a high-performance company where business structure, leadership principles and our culture are all aligned.”

When “The Rewire” phase is completed, Harley-Davidson will begin implementing its five-year strategic plan, “The Hardwire.”

Although shares have climbed 53% higher in the last six months, year-to-date, the stock is down 22%. (See Harley-Davidson stock analysis on TipRanks).

Ahead of the earnings release, Wedbush analyst James Hardiman added the company to the firm’s “Best Ideas List,” arguing that “the early-2020 quarantines and subsequent increased interest in outdoor products synced up perfectly with the management changeover,” and “has been beneficial to underlying fundamentals, providing the fuel for a meaningful and sustainable recovery.”

Hardiman has a Buy rating and $36 price target on the stock. This target puts the upside potential at 24%

The rest of the Street takes a more cautious approach. HOG’s Hold consensus rating breaks down into 1 Buy, 4 Holds and 1 Sell. Based on the $29 average price target, the downside potential lands at 13%.

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