Joe Friday

Harley's Beat: Was High Crude the Buffer?

David, thanks for posting that link. It was indeed an interesting read. Although I can see the prestige value of a Harley in India and elsewhere, I doubt India will ever be a significant market for HOG. My guess is that Harley will always have a certain cache, both in the US and elsewhere, the real issue, as I see it, is whether the current stock price is sustainable. I think not, expensive gas consuming toys are all going to be under pressure for the near future. That includes, RVs, SUVs, Boats, and Harleys.

Harley's Beat: Was High Crude the Buffer?

also worth noting with respect to the overseas sales, that currency exchange added about 40M to their earnings this quarter. I am not sure that is sustainable. The dollar has strengthened somewhat recently, and the European market has shown weakness in the auto business..

Harley's Beat: Was High Crude the Buffer?

while the results certainly appear to be good at first glance, a closer look reveals some much bigger issues.
1. their inability to sell the financing paper has meant that they are financing the majority of their bikes and taking back the paper on to their balance sheet. They are holding 3.8B of finance receivables on their balance sheet, and increase of 600M qoq.
2. The default rate on that paper, according to the cc was about 5%, and the ltv is very high (quite a bit of no down payment financing). They are at risk for large write offs down the road if the resale value of the bikes doesn't hold up and if their default rate spike at all. Big bikes are a luxury item for most people, and the default rates and resale value of the boat market would indicate that their are major risks in this regard for HOG.

HOG's balance sheet now has 3.8B of total financing receivables for bikes, not including their inventory financing to dealers, on total assets of 6.8B.

Investors in HOG need to appreciate that they are buying a finance company as well as a motorcycle company.