HOG - Why did Harley-Davidson's stock go up today? Better profits as shipments rose

Harley-Davidson ( NYSE: HOG ) on Wednesday rose 13% -- the stock’s biggest gain in 10 months – after the maker of motorcycles reported a profit that was better than expected.

EPS of $1.78 was $0.39 higher than the average estimate, while revenue growth of 20% from a year earlier to $1.65 billion beat the Wall Street consensus by $290 million.

Global motorcycle shipments climbed 19% during the quarter as production mostly recovered from an unexpected halt in the prior quarter. Its Harley-Davidson Motor Co. (HDMC) unit boosted revenue by 24% on unit growth and improved pricing. Operating margin nearly doubled by 9.5 percentage points to almost 18%.

Global retail motorcycle sales in Q3 slipped 2%, though there were regional differences. Strong demand and a quick refill of dealer inventory as production resumed helped fuel growth in Asia Pacific countries.

North America retail performance declined 5% amid ongoing constraints on dealer inventories, but grew stronger during the quarter as dealer inventories replenished.

“The decline in retail sales was primarily due to the lack of availability of inventory at the dealer network and as we got to mid-August, things started to turn positive and retail sales have been positive ever since,” Jochen Zeitz, chairman, president and CEO of Harley-Davidson, said in a regularly scheduled conference call with investors.

The company continues to expect HDMC revenue growth of 5% to 10% for the full year. It also forecast an operating income margin of 11% to 12% amid a decline in operating income by 20% to 25%. Harley-Davidson lowered its guidance on capital investments to a range of $170 million to $190 million from the previously expected $190 million to $220 million.

“There is still a bit of catch-up in the fourth quarter to do with a few thousand units and then it all depends on how retail is going to develop,” Zeitz said. “We certainly will stay very agile to make sure that supply and demand are in good balance and that we are not oversupplying the market.”

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