How Harley Could Kick Back Into Gear

Eddy Elfenbein submits: Michael Brush looks at the problems facing Harley (HOG):

Harley-Davidson finances about half the motorcycles it sells. Now, many of those customers are having a hard time keeping up with payments -- and the company is getting less for the Hogs it repossesses because used bike prices have been weakening.

The problems may only get worse. As lending standards tighten because of concerns about low-end borrowers, sales growth could suffer. Somewhere between 10% and 15% of bikes sold last year were rolled out of the showrooms by subprime borrowers. Already, the company has taken 2007 earnings growth guidance down to 4%-6% -- a hefty cut from the prior range of 11% to 17%.

He thinks it could go back to $75 a share. We'll find out more when earnings are announced on April 19. Due to the strike, I'm not expecting much, but the test will be whatever guidance the company gives.

HOG 1-yr chart: