Harley Shares Squealing Like a Pig
January 24, 2008

By Bill Visnic

The stock price of Harley-Davidson Inc. slid like a greased pig this week to near 5-year low, as even this longstanding media and financial-community darling of transportation-sector companies appears to have yielded under many of the same economic factors stifling the auto industry.

Harley’s stock price has dropped nearly 50 percent over the past year, and last week influential Citigroup downgraded Harley stock to a “sell” rating, predicting fourth-quarter sales that could be 12-14 percent lower than last year, and the company recorded a heavy sales and profit decline.

On January 25, the motorcycle maker reported fourth-quarter profit fell 26 percent $186 million, from $252 million in 2006. Sales dropped nearly 8 percent to $1.39 billion. Harley had cut its annual profit forecast in September and said in October that motorcycle demand was dropping on waning U.S. consumer confidence and sliding home values.

However, the slide has been a gradual but consistent one for Harley-Davidson, as perception may be catching up to reality, as evidenced by the stock price’s flirt with a low the company hasn’t seen in half a decade. As recently as fall 2006, Harley was reporting record sales and profits and mainstream and financial publications reported the company’s seemingly endless good fortunes under headlines such as, “Harley-Davidson Dazzles Wall Street.”

But under the surface of still-decent financials, Harley’s business might be a bit greasier than its fans would like. Harley, which also owns and sells Buell motorcycles, said last October it expected to ship between 328,000 and 332,000 motorcycles in 2007, down from 349,196 units in 2006. The company now appears unlikely to anytime soon broach the 400,000-unit sales mark to which it aspired for 2007.

Harley’s reputation among both hard-core bikers and monied yuppie adventurers has for years inspired marketing tie-ups with any number of corporate entities hoping to cash in on Harley’s gold-standard brand. In the auto sector, Ford Motor Co. has for some time had a co-marketing relationship with Harley, and it currently sells specially equipped Harley-Davidson variants of the F-150 and Super Duty pickups.

Ford says the ’08 Harley-Davidson F-150, with an optional supercharged 450-hp 5.4-liter V8, is the most powerful F-Series truck ever built by the factory. Ford has sold more than 60,000 Harley-inspired F-Series trucks since 1999. The ’08 models celebrate the 105th anniversaries of the two companies, both of which were founded in 1903.

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