I'm feeling more confident, want to spend money again
and I am returning to my more normal weight level.
Milwaukee Journal Sentinel
By Rick Barrett
January 11, 2011
It's more like a rumble than a roar, but increasingly investors and consumers are feeling confident about Harley-Davidson Inc.
On Friday, Harley shares hit a 52-week high of $37.16, up 73% from six months ago.
The Consumer Confidence and Employment SpinThe share price has climbed amid slowly improving consumer confidence and renewed interest in big-ticket items like motorcycles. Vigilant Grandpa (VG): Dec. consumer confidence dropped from November
"There could still be some room for improvement if we see employment numbers really pick up through the year," said Robin Diedrich, senior consumer analyst with Edward Jones Co. "It would help spur some sales domestically." VG: Typical analyst, wants you to believe "could", "if" and "some" are synonymous with bullish. Interpretation of analyst speak: IF we can hold up stock price long enough, we COULD get our core clients out with a huge gain and bring SOME additional big hitters to the firm.
Harley-Davidson officials declined to discuss their business outlook. The company's fourth-quarter 2010 earnings are scheduled to be released Jan. 25.
Analysts say the share price has returned to a more normal level, partly because Harley has slashed its operating costs and tightened its lending practices. VG: What exactly does "a more normal level" mean Ms. Diedrich? Are you suggesting a stock's "normal" level is similar to cholesterol, blood sugar and a river?
"But I would not let them off the hook entirely," Diedrich said, because the company faces long-term issues such as product development.
Harley has benefited from an improved stock market, especially with consumers whose wealth and spending habits are tied to the market. VG: well I guess we can rule out 14% of Americans receiving food stamps and 43.6 mil Americans deemed below the poverty level.
Those people have more confidence to buy the motorcycle they wanted a year ago, said Philip Gorham, senior equity analyst with Morningstar Inc. VG: Mr. Gorham, are you suggesting "confidence to buy" is the same as riding the HOG off the lot?
"Provided things don't fall off a cliff again, I think we will see a slow and steady rebound in demand," he said.
VG: Finally, we get to the real reason for the stock move!Recently, speculation has resurfaced that Harley may be a takeover target.
Similar rumors drove the share price higher last March, when investors speculated that Kohlberg Kravis Roberts & Co., a private equity firm that paid $25 billion for RJR Nabisco in 1989, was interested in Harley-Davidson.
A takeover is feasible but would not come easy, analysts said. Many private equity deals in the past involved acquisitions that had significant potential to cut costs.
Harley is deep into its restructuring and already has taken out millions of dollars in costs.
"I don't think an acquirer would find much low-hanging fruit," Gorham said.
"With the foundation for a turnaround already in place, shareholders may only be enticed to sell at a significant premium," he added.
Gorham said Harley shares are trading above where they should be at this point. VG: Kudos Mr. Gorham.
"I think there are other companies where an acquirer might gain more," he said.
Motorcycle dealerships may sell more bikes this year than in 2010, but much of their revenue will come from service, parts and accessories, according to PowerSports Network, a Sussex firm that develops dealership Web sites.
"We are predicting flat to slightly higher sales in 2011," said national sales manager David Valentine.
People want to spend money again, said Chaz Hastings, owner of Milwaukee Harley-Davidson.
He recently sold a new motorcycle to a Harley employee about to lose his job but who wanted to buy a bike while he still had a company discount.
"That's a hell of a purchase when you know you are getting laid off. But it also means he was pretty confident about finding another job pretty fast," Hastings said.
Consumers want to say good-riddance to the recession, said Genevieve Schmitt, publisher of Women Riders Now, an online motorcycle magazine.
"If nothing else, that collective optimism should be enough
to start getting people back into the dealerships," she said.
VG: OR NOT