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Harley-Davidson revs up profit to highest level in two years, EPS and quarterly revenues race past estimates

Retail sales in the US, its biggest market, suffered its sharpest fall in eight years
A Harley-Davidson bike
The iconic company made inroads on plans to add 2 million new riders in the US, grow international business to 50% of annual volume, and launch 100 new high-impact motorcycles

Iconic motorcycle maker Harley-Davidson (NYSE:HOG) sped off on Tuesday with its highest quarterly profit beat in two years, led by strong sales of its touring bikes in Europe that are popular with people of a certain age.

The company said net income hit $113.86 million or $0.68 per share, almost double the $68.2 million or $0.40 in the year-ago level. Revenue for the quarter climbed to $1.32 billion, against $1.15 billion and the consensus it would reach $1.07 billion. 

Retail sales in the US, its biggest market, were down 13.3% to 36,220, the steepest quarterly decline in eight years. Worldwide retail sales decreased by 7.85%.

The motorcycle maker was attacked by US President Donald Trump after it announced earlier in the year it was moving some production outside the US because of the administration's duties on steel and alminum. Trump blasted Harley and expressed support for a boycott of its products.

A report by CNBC quoted a BMO report as saying: "While President Trump's assessment of HOG's actions in his tweets were often factually inaccurate, the damage has been done. Dealers are feeling an impact, and we find that the impact has become more acute over time."

For the full year 2018 outlook, the company said motorcycle shipments to be approximately 231,000 to 236,000 motorcycles. In the fourth quarter, the company expects to ship approximately 45,800 to 50,800 motorcycles.

"As we manage our business with resilience in a challenging time in our history, we are leveraging our strengths for a more promising road ahead," said Matt Levatich, president and CEO of Harley-Davidson.

On the same day Harley released its results, the Wall Street Journal reported that Harley recalled 238,300 bikes due to issues with their hydraulic clutch assemblies.

Shares of Harley-Davidson dropped 5.6% to $36.54 in early Tuesday trade, having closed on Monday 2.12% weaker at $38.73.

During the quarter, Harley-Davidson made progress on initiatives including its More Roads to Harley-Davidson accelerated plan for growth to build 2 million new riders in the US, grow international business to 50% of annual volume, and launch 100 new high impact motorcycles.

READ: Harley-Davidson rides past second-quarter expectations but tariffs weigh on global sales

The company believes its accelerated plan will drive revenue growth and expand operating margins. The company expects to fund strategic opportunities while maintaining its current investment and return profile and capital allocation strategy.

"In the third quarter, we delivered new products and innovations with our model year 2019 motorcycles and engaged our dealers to support bringing the LiveWire electric motorcycle to market in 2019. Our brand and select products are now also accessible through a Harley-Davidson branded Amazon storefront in the US and significant support programs and dealer incentives were implemented to strengthen the dealer network - the hub of our customer experience," said Levatich.

Harley-Davidson is the parent company of Harley-Davidson Motor Company and Harley-Davidson Financial Services.

The company is based in Milwaukee, Wisconsin. 

Reporting by Rene Pastor, contactable on [email protected]

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