Saint Petersburg. Russia. St. Petersburg Harley days. Motofestival. Palace square. Motorcyclists waiting for a motorcycle race. 04.08.2018

Harley-Davidson Firing on All Cylinders

Harley-Davidson Inc. (HOG) is trading at a two-year high in Monday’s pre-market after beating Q1 2021 top and bottom line earnings estimates. The company posted a profit of $1.68 per-share during the quarter, $0.78 better than estimates, while revenue rose 29.4% year-over-year to $1.42 billion, beating consensus by more than $150 million. HOG now expects motorcycle segment growth between 30% and 35%, compared to previous guidance of 20% to 25%.

EU Escalates Trade War

The American icon also advised it would “vigorously defend its position” after a European Union decision to subject the entire HOG product line to a 56% import tariff, starting in June.  Continued trade tensions following Donald Trump’s defeat in 2020 underpinned the ruling, which may signal the end of all European operations. Even so, the company is firing on all cylinders so far in 2021, benefiting from a sales renaissance as a result of the pandemic.

Robert W. Baird analyst Craig Kennison recently summed up growing bullishness, noting “We are upgrading Harley-Davidson shares to Outperform for the first time since 2016. We like the strategic direction led by a proven leader and expect investors to get behind the change narrative embedded in the 2021 to 2025 plan. We see the potential for retail to turn positive in 2021 for the first time since 2014 — and note that lean dealer inventory should fuel a healthy replenishment cycle.”

Wall Street and Technical Outlook

Wall Street consensus has improved in lockstep with rising sales, now standing at an ‘Overweight’ rating based upon 7 ‘Buy’, 1 ‘Overweight’, 8 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $33 to a Street-high $55 while the stock is set to open Monday’s session more than $4 above the median $39.50 target. This placement shouldn’t act as a headwind because upgrades are likely to follow the bullish metrics.

The pre-market uptick marks the sixth attempt to mount resistance in the low 40s since a breakdown in the fourth quarter of 2018. A successful advance will complete a multiyear inverse head and shoulders breakout that could eventually test the 2017 high in the low 60s. However, mixed accumulation readings and shareholder anxiety in reaction to the tariffs are likely to dampen buying interest into the third quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.