- Harley-Davidson's management team are demonstrating their ability to work their growth plan.
- We are forecasting 16% bottom line growth and the team is exceeding that.
- A low, but consistently growing, dividend.
- Management has authorization to buy back 26.8 million shares with no price limit.
- return to it's roots, focusing on Touring, Custom and Sportster style motorcycles
- focus on international growth
- gear the business up for high single / low double digit growth
- return cash to shareholders.
Firstly though, our STRIDE ratings for the company are pretty much excellent across the board with our dividend rating being the only real soft spot on the radar - and we know this is improving.
A return to core HOG traditional sales
The key to this has been the Touring line. Unit sales up 30% and external reviews on the current range are nothing short of glowing. The truth is, this is what we all think about when we think about Harleys (and the iconic image of Arnie riding a Softail off a bridge with a truck chasing him, but that doesn't help my point).
We see that 'Road King' image firmly in our heads (well, I do at least).
Focus on international growth
This, to me, truly demonstrates the strength of this iconic brand, even internationally.
Gear the business for growthThe management team has been looking at ways to drive bottom line growth and has done a fantastic job at this, implementing:
- An online merchandise store which is bringing merchandise sales back to no shrinkage. It looks like, by the end of the year, this will be net positive in growth. While this drives some sales, this is more about brand and I'm happy to see this happening.
- Consolidation of manufacturing has been key in keeping costs down and the team has done a fantastic job of controlling this while growing.
- Eliminate unnecessary debt burden. The business has paid down $8b of debt in the past four years.
- Overall, all these signs demonstrate a business geared for tremendous growth over the coming 3-5 years.
The STRIDE picture ahead
So, we are happy with Harley and are holding it because:
- All the fundamentals stack up
- Timing is good
- Trading cheap as far as we're concerned
- We are forecasting double digit growth
- They are working a model that gives them significant moat
We find Harley-Davidson to be a compelling large cap growth story. A focused management team with a proven track record of delivery, a great opportunity to grow the brand, a growing dividend yield and, according to our valuation engine, trading on the cheap. So sadle up that HOG and ride it all the way to great returns.
Disclosure: The author is long HOG. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.
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