(Reuters) – Harley-Davidson Inc (HOG.N) beat expectations for profit on Tuesday and stuck to its full-year shipment forecast, allaying fears of another major hit from European import tariffs and a further slump in sales in its main U.S. market.
FILE PHOTO: Harley-Davidson’s new electric motorcycle, LiveWire, is shown in this handout photo released by Harley-Davidson. Harley-Davidson Motor Company/Handout via REUTERS
Shares of the company rose 7% in premarket trading as it posted the first rise in international sales in a year during the third quarter and a 3.6% dip in U.S. retail motorcycle sales – the smallest decline in nearly three years.
Profits continued to sink – by 24% – but the results offered some hope that one of the biggest names in motorcycles was finally beginning to arrest a slide in global sales that it has been fighting for years.
Sales in the world’s biggest motorcycle markets in Asia, which Harley has targeted with smaller bikes that go against its traditional profile, rose 8.7% in the quarter and are up about 1.6% this year overall.
The company plans to source half of its revenue from overseas by 2027 and international retail sales rose 2.7% to 23,619 motorcycle in the quarter.
While worldwide shipments fell 5.8% to 45,837 motorcycles, they topped analysts’ estimates by over 1,000 motorcycles, and the Milwaukee, Wisconsin-based company stuck to its 2019 shipment target of 212,000 to 217,000 bikes.
The company is also cutting spending and it said it now saw 2019 capital expenses of $205 million to $225 million, about $20 million less than its previous estimates.
Excluding items, the company earned 70 cents per share, beating Wall Street expectations of 52 cents while revenue from motorcycles and related products overall fell 4.9% to $1.07 billion.
TARIFF HIT DOUBLES
The company, which has been criticized by President Donald Trump for its plan to shift some U.S. production overseas, has also been battling the effects of trade tensions on its business globally.
Earlier this year, it said retaliatory import duties imposed by the European Union on its bikes would cost the company between $100 million and $120 million in 2019.
Brussels in June raised import duties on U.S.-manufactured Harley bikes to 31% from 6%, and the company said the impact from tariffs more than doubled in the third quarter from a year ago to $21.6 million.
In response, Harley plans to begin shipping bikes from its Thailand plant but a delay in regulatory approval from the trading bloc means it will not see any benefit in earnings before the second quarter of 2020.
Reporting by Rachit Vats in Bengaluru; Editing by Bernard Orr and Patrick Graham