Baird Downgrades Harley-Davidson Following Takeout Speculation Rally

Shares of Harley-Davidson Inc (NYSE: HOG) jumped on speculations of the company having received a bid from KKR & Co. L.P. (NYSE: KKR). Baird’s Craig R. Kennison downgraded the rating on Harley-Davidson from Outperform to Neutral, saying that the shares had rallied past “our fundamental price target.”

Speculation of KKR pursuing a takeover of Harley-Davidson at $65 per share sent the latter’s shares up 20 percent on Friday. Although the rumor was widely circulating, the news has not been corroborated by the companies, analyst Craig Kennison mentioned.

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“We contacted the company Friday. Following standard protocol, company representatives declined to comment. Historically, Harley has declined to comment in response to takeout speculation on multiple occasions, including an unfounded rumor involving KKR in 2010,” Kennison wrote.

Positive Outlook

The analyst commented that the opinion of the company continued to be favorable. Harley-Davidson is a highly valuable brand and enjoys “an intensely” loyal customer base. The company generates solid FCF and has a robust balance sheet, with only $750 million in corporate debt.

Kennison added, however, that Harley-Davidson’s shares had surged past the $54 fundamental price target, and evidence to support a takeout scenario would be need to “sustain our Outperform rating.”