Why Harley-Davidson Stock Fell Today

What happened

Shares of iconic motorcycle company Harley-Davidson (NYSE: HOG) are falling today, after the company reported a sharp drop in revenue for the second quarter of 2020. Furthermore, it's still early in its five-year transformation plan, and the Q2 results might be leading investors to question the plan's trajectory.

As of 11 a.m. EDT on Tuesday, Harley-Davidson stock was down 8%, and it's still significantly down year to date. 

HOG Chart

HOG data by YCharts.

So what

For Q2, Harley-Davidson generated revenue of $865 million, down 47% year over year. This resulted in a net loss of $92 million. It hadn't previously given financial guidance because of COVID-19. But both of these figures fell far below Wall Street's expectations.

Were Wall Street's expectations too high given the pandemic? Perhaps not; Harley-Davidson's peer Polaris Industries (NYSE: PII) reported a very different quarter. Overall net sales were only down 15% in its second quarter, and its North American retail sales actually surged 57% from last year. The company cited strong motorcycle sales as a contributing factor.

For a more apples-to-apples comparison, Harley-Davidson's retail motorcycle sales for North America fell 27% in Q2. By contrast, consumer retail sales for Polaris' motorcycle segment in North America went up by a "mid-20s" percentage in its Q2, the company said. Given the disparate results from these two motorcycle powerhouses, it's not surprising to see investors' disappointment with Harley-Davidson.

A frustrated man places his hands on his face with a down stock chart in the background.

Image source: Getty Images.

Now what

With a disappointing quarter in the rearview mirror, investor attention should be firmly fixed on Harley-Davidson's five-year strategic plan. It's currently in a preparatory phase it's calling the Rewire. This stage of the plan includes cutting costs, aligning product launches with riding season, and reducing outstanding inventory. To that end, the company is making progress.

The real plan is called the Hardwire, and it's expected to be revealed in the fourth quarter of this year. Management today said, "The driver of the new plan will be Harley-Davidson as the most desirable motorcycle brand in the world for its customers, employees, community and investors." I have to agree that few brands enjoy the recognition and loyalty of Harley-Davidson, so it does have that going for it.

But the company's revenue and profits were steadily falling pre-COVID. Therefore, it's important for investors not to get too excited before actually seeing the plan. When researching stocks, we're concerned with a company's profit potential. That's hard to predict with Harley-Davidson until the details of the strategic plan are revealed.

10 stocks we like better than Harley-Davidson
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Harley-Davidson wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of June 2, 2020


Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of Polaris Industries. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More