According to the Motorcycle Industry Council, 2021 motorcycle sales in the U.S. continued their rise across all segments; overall motorcycle sales rose 14.2% over 2020 figures and 21.8% over 2019 figures, across all segments, notes Jimmy Mengel, editor of The Crow's Nest.
Enter the single-most iconic motorcycle company of all time: Harley-Davidson (HOG). It is synonymous with bikes, just like Coke is synonymous with cola. It's just dropped some very impressive fourth-quarter highlights; here are some notes from Barron's that I’d like to share with you:
- Harley-Davidson earned an adjusted $0.15 a share in the fourth quarter, with motorcycle and related product sales of $816 million.
- Analysts surveyed by FactSet expected Harley-Davidson to report a fourth-quarter loss of $0.34 a share on sales of $669 million. A year earlier, the company posted a loss of $0.44 a share on sales of $531 million.
- The company also posted a strong fiscal year, with motorcycle and related products revenue rising to $4.54 billion and adjusted earnings coming in at $4.21 a share. Analysts were predicting earnings of $3.87 a share on motorcycle revenues of $4.4 billion.
- Consolidated revenues were up 40% for the quarter at $1.02 billion and up 32% in 2021 at $5.3 billion.
- Motorcycle revenue alone rose 71% to $546 million in the fourth quarter, while parts and accessories, general merchandise, and licensing also rose.
Motorcycle shipments increased 39% to $29.1 million. Retail motorcycle sales grew by 8% in North America during the fourth quarter, but declined across EMEA, Asia Pacific, and Latin America. This led to a nice bump in the stock and led Morgan Stanley to upgrade it. “We see a much more positive risk-reward,” said Billy Kovanis, an analyst at Morgan Stanley.
“Despite some potential challenges that lie ahead for Harley, we think this valuation is simply too low, especially as we forecast Harley to still grow revenues in 2022 and 2023 by 8% and 3%, respectively.” Morgan Stanley had forecasted earnings of $4.05 a share by 2023, up from $3.80 in 2021.
The other aspect of Harley-Davison’s business that often goes overlooked is its majority ownership of LiveWire — its electric bike motorcycle which, like most EVs, is becoming far more popular. Harley-Davidson will own about 74% of the electric-vehicle brand after it goes public through a $1.77 billion SPAC merger.
It also acquired StaCyc, which produces electric bikes for children. They are incredibly popular. They top out at around 11 miles per hour with small battery packs that can be recharged in under an hour.
Not only will these tike bikes bring in extra revenue, but they will also pump the brand into kids, getting them into electric bikes and setting them up to buy Harley products in the future. In the first nine months of 2021, Harley-Davidson made $41.3 million from selling StaCyc electric balance bikes. That's comparable to the $45.2 million in LiveWire electric motorcycle sales.
Both products will continue to sell, alongside the iconic Harley. I don’t see any downside for Harley-Davidson stock. We see plenty of open highway. Let’s add it to the long-term dividend portfolio, with a one-year price target of $54.
