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Motorcycle maker Harley-Davidson Inc reported a higher-than-expected quarterly profit as a recovering U.S. economy drove demand, and it raised its forecast for full-year shipments.
The company, whose shares closed up almost 9 percent on Tuesday, said its U.S. sales of new motorcycles in the second quarter showed their first year-over-year quarterly rise since the fourth quarter of 2006.
"I think Harley has done a very good job diversifying its ridership base over the past several years," said Sharon Zackfia, an analyst at William Blair & Co. "They're No. 2 in market share now in Europe. They're No. 1 in young riders in the U.S. under 35, which is a big change from 10 years ago."
In 2010, the company launched a marketing campaign to expand from its "core" base, which it describes as white males aged 35 and older -- the tattooed, bandanna-clad riders often associated with Harley's classic "hogs."
The campaign is showing results. Among U.S. riders aged 18 to 34 the company had a market share of nearly 49 percent in 2010, according to R.L. Polk & Co, a data gatherer for the automotive industry. In 2007, that number was 36 percent.
"It's a much broader demographic that the company addresses now than the company has historically," Zackfia said.
Sales of new Harley motorcycles rose 7.5 percent in the United States and 5.6 percent worldwide in the second quarter.
Prices of used motorcycles have been rising in the United States as financially weakened consumers opt for used motorcycles, and those higher prices are now drawing buyers back to new models, Zackfia said.
"It's been more of a battle against their own product, if you will, to get the new bikes into positive territory again," she said.
"Harley-Davidson has been aggressively managing new motorcycle supply in line with demand," the company's chief executive, Keith Wandell, said in an email to Reuters. He said the company's goal is to "narrow the price gap between used and new" bikes, leading "more customers to migrate toward new motorcycles."
International sales are expected to pick up in the second half, said James Hardiman, an analyst at Longbow Research.
First-half sales were hindered by supply-chain disruptions related to Japan's earthquake and tsunami disaster, while the company's sales in Brazil were "offline" as the company restructured its dealerships there, he said.
"Certainly as we work our way through the year, Brazil should be a lot better than it was," Hardiman said. "It is a country that in theory has a lot of bike demand."
EARNINGS BEAT STREET
Income from continuing operations for the second quarter ended June 26 rose to $190.6 million, or 81 cents per share, from $139.3 million, or 59 cents per share, a year earlier.
Analysts on average expected the Milwaukee-based company to report a profit of 71 cents per share, according to Thomson Reuters I/B/E/S. Revenue rose 18 percent to $1.34 billion, beating the average analyst forecast of $1.26 billion.
Harley-Davidson said it now expected to ship 228,000 to 235,000 motorcycles to dealers and distributors worldwide in 2011, compared with an April forecast of 215,000 to 228,000.
In the third quarter, Harley-Davidson expects to ship 60,000 to 65,000 motorcycles.
Harley-Davidson shares closed up 8.9 percent at $45.09.
Improving demand for leisure vehicles was also evident in the earnings of all-terrain vehicle maker Polaris Industries Inc, which also reported stronger-than-expected earnings. Shares of Polaris, which also raised its outlook for the year, rose 4.6 percent to $118.06.
(Reporting by Kyle Peterson, additional reporting by Roy Strom in New York, editing by Maureen Bavdek, Lisa Von Ahn, Ted Kerr, Gary Hill)