WRAPUP 3-Harley, Polaris top estimates, stocks part ways

* Harley Q3 EPS $0.40 vs Street view 35 cents

* Polaris Q3 EPS $1.37 vs Street view $1.14

* At Harley, finance strength offsets bike sale weakness

* At Polaris, strong ATV demand, growing margins, are key

* Polaris shares up 5 percent; Harley down 5 percent
(Recasts first seven paragraphs, adds S&P cutting
Harley-Davidson, updates shares)

By James B. Kelleher

CHICAGO, Oct 19 (BestGrowthStock) – The two leading U.S.
manufacturers of powersports products reported
better-than-expected earnings on Tuesday. But the vastly
different outlooks the companies provided for U.S. sales sent
their shares in opposite directions on Wall Street.

Heavyweight motorcycle maker Harley-Davidson Inc (HOG.N: )
reported a stronger-than-expected profit — but only because
improved results at its once-struggling finance arm helped
offset stubbornly soft sales of its bikes.

The Milwaukee-based company also said the economy in the
United States, its biggest market by far, continues to hurt
sales there and said it was not sure when U.S. buyers would
return to dealer showrooms or in what numbers.

On a conference call to discuss the results, Keith Wandell,
Harley’s chief executive, said: “The economy has yet to turn
around in a convincing way and many consumers remain on the
sidelines.”

Erik Kolb, an analyst at Standard & Poor’s, responded by
cutting the stock’s rating to “sell” from “hold,” citing
concern about Harley’s sales and margins. Harley-Davidson
shares fell as much as 5.5 percent in trading on the New York
Stock Exchange.

Polaris Industries Inc’s (PII.N: ) Street-beating results, on
the other hand, were driven by strong sales of its core
product: an ATV whose side-by-side seating plan has proved
popular with buyers, including many farmers, who use it as a
work vehicle.

Unlike Harley, Polaris, which also makes snowmobiles and
motorcycles, also raised its full-year profit outlook, sending
its shares up over 5 percent.

Harley-Davidson reported a third-quarter net profit of
$88.8 million, or 38 cents a share, up from $26.5 million, or
11 cents a share, a year earlier.

Sales fell about 2 percent to $1.09 billion.

Stripping out costs from Italian sports bike maker MV
Agusta, which Harley-Davidson sold in August, earnings were 40
cents a share. Analysts on average were expecting 35 cents,
according to Thomson Reuters I/B/E/S.

The in-house financial services unit reported an operating
profit of $50.9 million, compared with a year-earlier loss of
$31.5 million that had prompted speculation that Harley might
get out of the lending business.

The finance unit’s turnaround helped offset continued
weakness in the company’s motorcycles and related products,
where operating income fell 22 percent to $101.5 million.

Worldwide sales of the company’s bikes fell 7.7 percent,
pulled down by a 9.4 percent decline in the United States, the
company’s biggest market.

During a conference call with analysts, Harley-Davidson
chief executive acknowledged that high U.S. unemployment was
hurting sales.

Of the more than 8 million U.S. jobs lost in the recent
downturn, nearly half were in either manufacturing or
construction sectors — industries whose blue-collar workforces
have traditionally been big Harley Davidson buyers.

Harley-Davidson has responded by slashing its manufacturing
operations.

Given the difficulties in its home market, Ed Aaron, an
analyst at RBC Capital Markets, said he was “encouraged” by the
single-digit sales decline there and by what he said was “a
meaningful improvement” in sales as the quarter continued.

Minneapolis-based Polaris reported a third-quarter profit (Read more your timing to make a profit.)
of $47.2 million, or $1.37 a share, up from $31.2 million, or
94 cents a share, a year earlier.

Revenue rose 33 percent to $580.1 million, lifted by a 49
percent jump in sales of ATVs, which, unlike motorcycles, are
often used as working equipment on farms and ranches.

Sales of the company’s Victory brand motorcycles, a distant
rival of Harley-Davidson, soared 116 percent to $20.1 million.

Polaris said pricing power, lower product costs and
favorable currency swings helped increase its gross margin by
nearly 2 percentage points during the quarter.

Shares of Polaris were up $3.48 at $73.00 in afternoon
trading on the New York Stock Exchange; they hit a year-high of
$73.24 earlier. Harley shares were down $1.66 at $30.83; they
fell as low as $30.70 at one point.
(Reporting by James B. Kelleher; Editing by Gerald E.
McCormick and Derek Caney)

WRAPUP 3-Harley, Polaris top estimates, stocks part ways