Why Harley-Davidson Is On the Move
Harley-Davidson's profit engine is revving up. Despite a cold and wet spring in the U.S., the motorcycle maker saw its earnings bounce in the second quarter of 2013.
Profits rose by 13% to $1.21 a share, versus the $1.08 that Harley managed in the year-ago quarter.
The company didn't get much help from the weather this time around. What Harley described as a "prolonged and unseasonably cool and wet spring" put the brakes on sales in the U.S., which logged just a 4.4% rise in motorcycle sales. Harley also had a tough comparison to deal with. Last year's spring was "abnormally early and warm" in North America, the company pointed out.
Still, cost cuts and strong global results more than picked up the slack from uncooperative weather patterns. Worldwide sales came in at 90,000 motorcycles, well ahead of the 80,000 to 85,000 that the company had forecast for the quarter.
Gross margin also came in much better than expected. Harley managed to boost that figure by a full percentage point, to 36.9%. The company is still reaping big benefits from its transition into a leaner production model. One example of that move is the surge production at its York, Pa., plant. The aim there was to increase flexibility by moving production closer to the prime shopping season. Harley says the new strategy has been a "great success," and that's evident in the company's rising profitability since launching it.
2012 Gross Margin
2013 Gross Margin
That weakness in the North American market might have kept a cap on the company's sales expectations for the full year. Despite this quarter's beat, Harley didn't change its forecast for between 259,000 and 264,000 total motorcycle shipments in 2013, or 5% better than last year's haul. But a more efficient operation means that investors can expect earnings to grow much faster than that. In fact, profits are already tracking 21% higher through the first six months of this year.
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The article Why Harley-Davidson Is On the Move originally appeared on Fool.com.Fool contributor Demitrios Kalogeropoulos owns shares of Harley-Davidson. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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