The Associated Press October 14, 2011, 11:54AM ET

Earnings Preview: Harley-Davidson 3Q results

Harley-Davidson Inc.'s streak of sales increases is expected to continue when the motorcycle maker reports its third-quarter results on Tuesday.

Despite volatile markets and the slower-than-expected economic recovery, it appears that more Americans are heading to Harley dealerships and shelling out for the often-pricey bikes.

WHAT TO WATCH FOR: In the second quarter of this year, the Milwaukee-based company's U.S. retail sales rose 7.5 percent, marking its first domestic sales increase in five years. Overall sales also rose in the first quarter, but that was because of an increase in overseas demand.

KeyBanc Analyst Scott Hamann said that while sales growth appears to have slowed in the quarter's final weeks, Harley still should post an overall third-quarter sales increase. He rated the company at "Buy" with a $48 price target.

In addition, dealer restocking of very low inventories at the end of the second quarter probably boosted third-quarter shipments, and the company should continue to reap the benefits of its ongoing manufacturing restructuring this year, he said.

Hamann backed his third-quarter profit prediction of 80 cents per share, along with his full-year 2011 and 2012 estimates.

"We continue to like the story longer term as we have continued to see a gradual improvement in retail sales domestically and the international market is growing more rapidly," Hamann wrote in a Friday note to investors. "Additionally, substantial savings from the restructuring create an attractive earnings growth scenario."

WHY IT MATTERS: Motorcycles, especially Harley's highly customized models, are considered luxury items and not necessities. As a result, bike sales tend to fall during tough economic times.

When the economy took a turn for the worse a few years ago, Harley's sales plunged and the company shuttered plants and eliminated thousands of jobs. Continued domestic sales growth could bode well not just for Harley, but also for the U.S. economy.

WHAT'S EXPECTED: Analysts, on average, expect a third-quarter profit of 76 cents per share on $1.29 billion in sales, according to a FactSet poll.

LAST YEAR'S QUARTER: For the third quarter of 2010, Harley-Davidson's profit more than tripled to $88.8 million, or 38 cents per share, thanks to a boost from its financial services division. Excluding discontinued operations, the company earned 40 cents per share. Revenue fell 2 percent to $1.09 billion.


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