Iconic Motorcycle Manufacturer Harley Davidson (NYSE: HOG) was a pariah in 2018 when then-President Donald Trump rogue the company for move part of the production abroad to reduce trade tariffs. While profits fell during the 2020 pandemic, the company has been profitable for the past five years. Harley Davison is the second largest motorcycle manufacturer in the US behind Polaris (NYSE: PII). However, Polaris is not a pure game in motorcycles, as it also makes recreational vehicles (RVs) marine products that compete with Thor Industries (NYSE: THO), Camping World (NYSE: CWH)and Winnebago (NYSE: WHO). To this day, all Harley motorcycles sold in the US are assembled in the US in one of four domestic factories. However, this does not mean that all parts are made in the USA. About 70% to 80% of the parts come from the US, while other components are outsourced from other countries, including Italy, Taiwan, Austria, Japan, Mexico and China. Overseas Harleys are made overseas in factories in Brazil, India and Thailand.
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Strong demand but low stock
Demand was very strong, but dealer inventories were low due to the production suspension in the previous quarter due to defective third-party manufacturing issues. The company was able to resume normal inventory flow by the end of the quarter and expects strong demand to continue. The Hardwire strategy implemented by the company in 2020 is bearing fruit. The focus on apparel and licensing was a key driver for the Harley Davidson lifestyle brand, as apparel sales grew 41% and licensing grew 26% in the last quarter. The brand is so uniquely american that it appeals to both motorcyclists and non-riders. Hardwire’s five-year plan is starting to pay off.
This outbreak lacks volume
The weekly candlesticks for HOG made higher lows since the swing low at $29.90 en route to the earnings report. The weekly MSL trigger breakout over $36.67 launched stocks back up to retest the $42.75 resistance. While the breakout of a single weekly candle looks robust, the volume behind the move is missing with only 12.5 million shares. Compare that volume to the volume of the last five attempts (which failed) to break the $42.75 level. These volume levels ranged from 15.2 million shares to 35.2 million shares, which was still not enough to sustain the rally. The volume of light at the candlestick’s latest breakout attempt suggests that the breakout may not hold. A fall back to the new supports should be observed if you are looking for an entrance as the foundations have been significantly improved. The $39.30 is the gap fill level, $36.67 is the weekly MSL trigger, $35.44 rising trendline support, $34.01 and $32.13 support levels and the $29.80 swing low support.
The turnaround is accelerating
On October 26, 2022, Harley-Davidson reported its third quarter 2022 fiscal results for the quarter ended September 2022. $1.40, a stroke of $0.38. Revenues grew 23.8% year-over-year (year-on-year) to $1.44 billion, better than analysts’ estimates of $1.36 billion. Worldwide motorcycle shipments were up 19% year-on-year as production rebounded from a previously announced suspension in the second quarter of 2022. North American sales declined (-5%), mainly due to inventory restrictions at dealerships, but inventories declined. improved towards the end of the quarter. The HD 1 marketplace is the year-old online used bike platform with more than 30,000 motorcycle listings, including more than 2,000 Harley-Davison certified bikes. The site has been visited nearly three million times since its launch.
Reconfirmed guidance for the whole year
Harley reaffirmed its full year guidance with forecasted revenue growth of 5% to 10% with an operating margin of 11% to 12%. Capital expenditures will range from $170 million to $190 million, down from the previous estimate of $190 million to $220 million.
LiveWire spin-off
On September 27, 2022, LiveWire (NYSE: LVWR) began trading on the New York Stock Exchange. LiveWire is a electric motorcycle spin-off of the previous Harley-Davidson electric motorcycle division that completed the business combination with AEA-Bridges Impact Corp in a reverse SPAC merger. Harley-Davison owns 89.4% of the company. The first electric motorcycle, LiveWire ONE, can travel 150 miles on a single charge, which can take 11 hours to 100% charge from a 110-volt outlet. A DC fast charger can be fully charged within an hour using a J1772 charging connector. Jochen Zeitz, CEO of Harley-Davidson, commented: “The closing of this listing transaction is a proud and exciting milestone in our ambition to make LiveWire the most desirable electric motorcycle brand in the world. We believe LiveWire is well positioned to define the two-wheel EV market and we are excited about the future.” More details will come in the fourth quarter with LiveWire president Ryan Morrisey.
