Picture: REUTERS
Picture: REUTERS

Bengaluru — Harley-Davidson is sticking with a cautious outlook for 2019 that indicates its struggles with long-term competitive problems even as US President Donald Trump changes tune on the company, promising to stand up for it in global trade talks.

Shares in the Milwaukee-based firm, buffeted by Trump’s rows with Europe and China over tariffs, surged as much as 4% after the president called the EU’s treatment of the company “unfair” and vowed to reciprocate.

The company also posted profit for the first quarter that was more than 30c a share ahead of expectations, but reported continuing declines in sales that analysts said did not change an overall difficult picture for Harley.

Harley’s shares — which have suffered from the company’s struggle in the past decade to attract younger fans as core customers, won as a result of its 1960s and 70s heyday, grow older — were flat by mid-morning.

“We remain cautious in our outlook for the US motorcycle industry, and continue to rate the shares ‘hold’,” Stifel analyst Drew Crum said.

Trump had previously criticised Harley for its plans to shift some US production overseas to avoid EU duties imposed in retaliation for the tariffs the White House placed on imported steel and aluminium in 2018. EU tariffs on US-manufactured motorcycles, which increased to 31% from 6% last June, are set to rise to 56% in 2021.

Harley said retaliatory import duties, mainly those imposed by the EU, will cost the company between $100m and $120m in 2019. Similarly, China’s tariffs on the bikes exported from the US have increased to 55% from 30% as a result of the trade war between the world’s two biggest economies.

“The big impact for us is the EU tariffs. And nothing has changed since the EU increased the import tariff from 6% to 31% last June,” Harley CEO Matthew Levatich said in an earnings call with analysts when asked about Trump’s tweet.

Harley’s first-quarter shipments fell 8% to 58,891 motorcycles but exceeded a consensus market estimate of 54,420. Its full-year guidance of 217,000 to 222,000 also compared well with a consensus of 217,840, according to IBES data from Refinitiv.

Both of those consensus figures, however, had fallen sharply on Monday after brokerage UBS warned March sales had been weak and threatened 2019 shipments, flattering the official numbers. The previous annual consensus for 2019 last week stood at 222,150.

Overall sales continued to fall. US retail motorcycle sales, or sales by dealers to customers, fell 4.2% in the first quarter ended March 31. European sales were down 2.1%.

The company’s overall net income fell 26.7% to $127.9m in the quarter, while revenue from motorcycles and related products fell 12.3% to $1.19bn, roughly in line with forecasts.

That generated earnings per share, excluding items, of 98c, compared with the average analyst estimate of 65c a share, according to IBES data from Refinitiv.