Harley-Davidson share under pressure! Quarterly figures disappoint despite profit increase

Harley-Davidson (NYSE:HOG) published its quarterly figures on Thursday, putting pressure on the shares of the traditional motorcycle manufacturer. Despite solid earnings of USD 0.91 per share, which exceeded market expectations of USD 0.84, a significant decline in sales is causing uncertainty among investors.

In the third quarter of 2024, Harley-Davidson suffered a 26% drop in sales to 1.15 billion US dollars. Although this figure was above the experts' expectations, who had forecast 972.72 million US dollars, this is a significant decline compared to the previous year. Particularly alarming is the 39 percent drop in motorcycle sales, which was primarily caused by dealers reducing their inventories and subdued demand. The decline was even more pronounced on the international markets: Here, sales figures fell by 18 percent, while a 10 percent decline was recorded in North America.

Harley-Davidson faces economic challenges but remains strong in the financial sector

Jochen Zeitz, CEO of Harley-Davidson, explained during the presentation of the quarterly results for the third quarter of 2024 that the company is working hard to overcome the effects of the current economic challenges. “High interest rates as well as macroeconomic and political uncertainties are weighing on our industry and our customers, especially in our core markets,” said Zeitz.

While the core motorcycle business is weakening, the financial services business (Harley-Davidson Financial Services, HDFS) was able to make a positive contribution to the overall result. Operating profit in this area rose by 29 percent to 77 million US dollars, mainly due to higher interest income and lower risk provisions.

For the full year 2024, Harley-Davidson now expects a decline in sales in the HDMC (Harley-Davidson Motor Company) segment of 14 to 16 percent compared to 2023. The operating margin is expected to be in a range between 7.5 and 8.5 percent.

Conclusion:

Despite profits exceeding expectations, the mood on the market remains tense. Harley-Davidson is facing major challenges, particularly as a result of weaker demand and the difficult situation on the international markets. The solid growth in the financial services business remains positive, giving the company stability at least in this area. It will be interesting to see how Harley-Davidson reacts to the current situation and what measures it will take to maintain its position in a volatile market environment.

Restrained demand: Harley-Davidson is facing the challenge that traditional customer groups are shrinking. The core target group - generally baby boomers - is ageing, and younger generations are showing less interest in the large, expensive motorcycles. However, demand is increasingly shifting towards lighter, more affordable models and the entry-level model around €12,000 is still missing. To date, no adequate replacement for the Sportster Evolution models has been delivered. The next problem will be the extent to which the introduction of the Euro 5+ standard for motorcycles from 2025 will affect the market and the liquidity of authorized dealers.

Dealer stock: Another aspect is the reduction in inventory and reluctance to invest on the part of dealers, which is further exacerbated by weak demand. Many dealers are reacting cautiously and are skeptical about the future, especially in light of reports that successful models such as the Sport Glide will be discontinued in the 2025 model year. This already suggests that sales figures could fall further next year, unless Harley-Davidson surprises with new models or unexpected changes in model year 2025 that rekindle customer interest.

Text: Harleysite