Harley-Davidson Stock Rises 4% After Strong March Data: Here's What Could Be Next

Shares of Harley-Davidson Inc (NYSE: HOG) rose 4 percent after UBS' bullish comments on the motorcycle maker's March retail sales.

Analyst Robin Farley said a warm winter boosted the March retail sales of HOG to "close to 10 percent," and better than the Street estimates. He also said the company is likely to stick with its full-year guidance when it announces its first quarter results on April 19.

In January, the company said it expects to ship 269,000 to 274,000 motorcycles in 2016, a growth of about 1 percent to 3 percent increase from 2015 shipments. However, the analyst noted that the high-end of the guidance "may still be too high" as he expects shipment growth of 1.5 percent.

Related Link: William Blair Downgrades Harley-Davidson Pending Consistent Return To Retail Sales Gains

That said, UBS' first-quarter earnings view of $1.31 is above the consensus estimate of $1.29, and its gross margin forecast is in line with the Street at 38 percent.

Commenting on the retail sales, Farley noted, "With Jan'16 retail sales for HOG down in the U.S. and Feb up low single digits, we believe HOG US retail sales overall are up around 5 percent in Q1."

For the first quarter, the company expects to ship 78,000 to 83,000 motorcycles versus 79,589 motorcycles shipped in the year-ago period. UBS sees 1 percent shipment growth at 81,000 bikes.

Harley-Davidson, UBS And Investors

As investors are cheering on the UBS comments on sales data, Farley says the company may reduce the line-up of vehicles, a move that would simplify manufacturing.

"Harley had added models to its line-up over time to try to appeal to buyer preferences and more outreach groups. But we continue to believe that HOG may prune some models with model year '17 launch this Aug," Farley explained.

"We first flagged this outcome in Nov note that it might make sense for HOG to reduce its 40-bike model line-up, which will help reduce inventory dealers must stock and could reduce manufacturing complexity," added Farley who has a Buy rating and $57 price target on HOG stock.

Shares of Harley-Davidson were up roughly 4 percent Wednesday at $46.74.

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