Harley Dealer Survey Shows Tepid Sales Of No. 3 Big Twin Engine In 80 Years

Sales of bikes sporting the ballyhooed Milwaukee Eight — only the third all-new “Big Twin” engine from Harley-Davidson Inc HOG in 80 years — have been as tepid as the weather has been stormy, which doesn’t bode particularly well for the motorcycle company’s second quarter,

Bernstein analyst David Beckel, in a note previewing Q2 sales based on interviews with 43 Harley dealers, said those two factors look to be a drag on earnings.

He rated the company at Market-Perform with a target price of $55. Harley was trading at $51.56 on Friday.

“Overall, we expect US retail sales to continue to be negative, but we see no risk to full-year shipment guidance,” he wrote.

Dealers Upbeat, But ...

“Our dealers were characteristically positive when asked if Q2 sales were better or worse than last year, but a deeper look at dealer commentary suggests their optimism may not necessarily translate to Harley. Many positive comments on the quarter reflected stronger dealer operations rather than improvements in the macro environment.”

Dealers who cited declines in sales cited unfavorable weather, he said, and while the new Milwaukee Eight engine looks to be a key contributor to sales, it’s “not to the extent that we would have expected now that (model year 2016) inventory has been cleared.”

Harley, which doesn’t change its engines very often, has a lot riding on the Milwaukee Eight, which was introduced for the current model year and is only available in the large-displacement, fully kitted touring bikes.

The new motors have been well-reviewed by the motorcycling press — torque and horsepower are up while heat is down.

“When combined with a potential headwind from bad weather, a stagnating economy, declining used bike prices, and no discernable hope of an oil and gas tailwind, we expect retail sales to be down low single digits against an easy comp,” Beckel said. “If retail sales are down only moderately this quarter and management continues to expect a rebound in the back half of the year, we expect full-year guidance will be maintained.”

Related Link: Boomers Or Bust? Bernstein Downgrades Harley-Davidson