Harley Bounces on Strong Q4 and Solid Profit Outlook; Shares Fairly Valued

Wide-moat Harley-Davidson shocked investors with a $0.15 EPS print in its fourth quarter, well ahead of the $0.27 loss we had forecast, sending shares up 10%. Relative to our expectations, motorcycle-related revenue outperformed across all areas, with shipments up 39%, average selling prices rising 16%, parts and accessories higher by 13%, and general merchandise climbing 46%. Altogether, this led to motorcycle-related revenue growth of 54% (versus our 26% growth forecast). While the motorcycle operating margin loss of 12% was in line with our model, the financial services business outperformed, bolstered by lower interest costs, also adding to EPS. More impressive was the company’s inaugural 2022 outlook, which included motorcyclerelated sales growth of 5%-10% and a motorcycle operating margin of 11%-12% (which is more than 200 basis points over 2021’s 9% GAAP figure). While the sales forecast aligns with our existing 6.6% motor company sales projection, the profit margin outlook handily outpaces our 9.5% estimate preprint.