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HARLEY-DAVIDSON, INC. (HOG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 EPS of $0.88 missed consensus $0.93, while revenue of $1.31B beat consensus $1.10B; margin compression from lower shipments and tariff headwinds drove the EPS miss despite price/mix offsets on revenue [GetEstimates: Primary EPS Consensus Mean*] [GetEstimates: Revenue Consensus Mean*].
  • HDMC revenue fell 23% YoY and operating margin declined to 5.9% as wholesale shipments were reduced to right-size channel inventory and demand remained soft; global retail sales declined 15% YoY, with North America -17% and APAC -21% .
  • Strategic HDFS partnership with KKR/PIMCO unlocks ~$1.25B in cash, sets HDFS on a capital-light path, and supports plans to repurchase ~$500M in H2’25 and reduce debt by ~$450M; HDFS FY25 operating income guided up to $525–$550M (from “down 10–15%” in Feb) .
  • Management continues to withhold HDMC full-year 2025 guidance given tariff/macro uncertainty; LiveWire guidance improved to operating loss $59–$69M and cash use $50–$60M for FY25 .
  • Additional catalysts: inclusion of Harley motorcycles in newly enacted U.S. auto loan interest tax deduction (up to $10k/year), sequential North America retail improvement, and a new efficiency program leveraging AI to drive cost savings .

What Went Well and What Went Wrong

What Went Well

  • HDFS resilient and strategically repositioned: Q2 operating income ~$70M, with FY25 guided to $525–$550M post-transaction; capital-light model expected to lift ROE in “high 20s” over time .
  • Channel health and price/mix discipline: Global dealer inventories down 28% YoY; favorable pricing and FX partially offset volume/margin pressure; management restrained promotions versus competitors .
  • Clear capital allocation: ~$1.25B cash unlock to fund ~$500M H2 buybacks and ~$450M debt reduction, plus optional ~$300M for growth initiatives .
    • “With the cash from the transaction, we plan to reduce our debt by $450 million and accelerate our $1 billion share buyback program… by the purchase of $500 million in the second half of ‘25.” — Jochen Zeitz .

What Went Wrong

  • Margin compression from lower operating leverage and tariffs: HDMC gross margin fell to 28.6% (−350 bps YoY) and operating margin to 5.9% (−880 bps YoY) due to reduced shipments and $13M tariff costs in Q2 .
  • Demand softness: Global retail −15% YoY with North America traffic weaker than expected; APAC particularly soft (China and Japan) .
  • LiveWire volume pressure: Q2 LiveWire unit sales 55 (−65% YoY), revenue $6M (−7% YoY), though operating loss improved to −$19M .

Financial Results

Consolidated and HDMC Key Metrics

MetricQ2 2024Q1 2025Q2 2025
Consolidated Revenue ($USD Millions)$1,619 $1,329 $1,307
Diluted EPS ($USD)$1.63 $1.07 $0.88
HDMC Revenue ($USD Millions)$1,349 $1,082 $1,044
HDMC Gross Margin %32.1% 29.1% 28.6%
HDMC Operating Margin %14.7% 10.8% 5.9%
Motorcycle Shipments (thousands)49.7 38.6 35.8

Estimates vs Actuals

MetricQ2 2024 Estimate*Q2 2024 ActualQ1 2025 Estimate*Q1 2025 ActualQ2 2025 Estimate*Q2 2025 Actual
Revenue ($USD Millions)$1,273*$1,619 $1,111*$1,329 $1,096*$1,307
Primary EPS ($USD)$1.40*$1.63 $0.77*$1.07 $0.93*$0.88

Values retrieved from S&P Global.*

Highlights: Q2 2025 revenue beat; EPS missed. Q1 2025 beat both; Q2 2024 beat both [GetEstimates: Revenue Consensus Mean*] [GetEstimates: Primary EPS Consensus Mean*].

Segment Breakdown

Segment MetricQ2 2024Q2 2025
HDMC Revenue ($USD Millions)$1,349 $1,044
- Motorcycles$1,069 $778
- Parts & Accessories$194 $187
- Apparel$63 $55
- Licensing$5 $6
- Other$17 $18
HDFS Revenue ($USD Millions)$264 $257
HDFS Operating Income ($USD Millions)$71 $70
LiveWire Revenue ($USD Millions)$6 $6
LiveWire Operating Loss ($USD Millions)$(28) $(19)

KPIs and Operational Metrics

KPIQ2 2024Q2 2025
Global Retail Sales (thousands)50.0 42.3
North America Retail (thousands)34.8 28.9
EMEA Retail (thousands)8.0 7.6
APAC Retail (thousands)6.3 5.0
Latin America Retail (thousands)0.8 0.7
Dealer Inventories YoY—−28%
Tariff Cost (Q2) ($USD Millions)—$13
Financing Receivables (quarter-end, $USD Billions)~8.0 $7.3
Cash & Cash Equivalents ($USD Billions)$1.85 $1.6
Cash from Operating Activities (YTD) ($USD Millions)—$509
Effective Tax Rate (YTD)—23%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
HDMC RevenueFY 2025Flat to down 5% (Feb 5) Withdrawn (May 1); continuing to withhold (Jul 30) Withdrawn/maintained
HDMC Operating MarginFY 20257.0%–8.0% (Feb 5) Withdrawn (May 1); continuing to withhold (Jul 30) Withdrawn/maintained
HDFS Operating IncomeFY 2025Down 10–15% (Feb 5) $525–$550M (post-transaction) Raised
LiveWire Operating LossFY 2025$(70)–$(80)M (Feb 5) $(59)–$(69)M Improved
LiveWire Cash UseFY 2025~$49M (Q1 call) $50–$60M Higher range
EPSFY 2025Flat to down 5% (Feb 5) Withdrawn (May 1) Withdrawn
Share RepurchasesH2 2025$1B by 2026 (program announced Jul’24; reiterated Q1) ~$500M in H2’25 Accelerated near-term
Debt Reduction2025—~$450M reduction New action

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Tariffs & macroEstimated FY25 tariff impact $130–$175M (Q1); guidance withdrawn due to tariff/macro uncertainty FY25 direct tariff impact now $50–$85M; $13M hit in Q2; EU agreement seen as positive step Improving outlook vs Q1 assumptions
Supply chain & inventoryDe-stocking and channel health; dealer inventory down 19% YoY in Q1 Dealer inventory down 28% YoY; continued prioritization of inventory reduction Continued progress
Product performanceTouring grew in 2024; Softail redesign; entry-level products planned Touring lapping strong MY24; RevMax AT/Sportster up 16% NA; targeted promotions; price discipline Mixed: strength in select platforms, constrained Touring
HDFS strategyConsidering value-enhancing options; strategic importance reiterated Partnership with KKR/PIMCO; capital-light model; ROE targeted high-20s; $1.25B cash distribution Major strategic shift, investor-friendly
AI/efficiencyProductivity savings program (target $400M across periods) New efficiency program leveraging AI to drive substantial cost savings Incremental cost actions
Regional trendsQ1: NA −24%, APAC −28%, EMEA −2% Q2: NA −17%, APAC −21%, EMEA −5%; sequential improvement in NA traffic Stabilizing/sequential improvement
Regulatory—U.S. tax deduction for interest on U.S.-built motorcycle loans up to $10k/year Demand supportive

Management Commentary

  • “We are extremely pleased to announce a strategic partnership for HDFS with KKR and PIMCO that generates significant value… unlock $1.25 billion in cash… reduce our debt by $450 million and accelerate our $1 billion share buyback… $500 million in the second half of ’25.” — Jochen Zeitz .
  • “We expect this transaction to boost HDFS earnings substantially this year by $275–$300 million operating income… and to grow HDFS operating income quickly towards pre-transaction levels in an asset-light manner in future years.” — Management .
  • “Harley-Davidson motorcycles have been included in the recently signed automotive tax deduction legislation… interest paid on loans for new U.S.-built motorcycle purchases up to $10,000 annually is tax deductible…” — Management .
  • “We will look to introduce a new efficiency program and leverage technology including AI, which we expect will deliver substantial cost savings…” — Management .
  • “Global dealer motorcycle inventories were down 28% at the end of Q2 compared to ’24.” — Management .

Q&A Highlights

  • HDFS valuation and earnings path: 1.75x post-transaction book value; FY25 HDFS OI expected $525–$550M; normalized OI ~$240–$250M in new model beyond 2026 .
  • Transaction mechanics/timing: ~$275–$300M incremental HDFS OI in FY25 from reserve release and premium sale; close expected in tranches across Q3/Q4 .
  • Tariffs: FY25 direct tariff impact reduced to $50–$85M (from $130–$175M); Q2 impact $13M; company actively mitigating via shipment timing, supply chain diversification .
  • Demand cadence/inventory: sequential NA retail improvement since Feb; target double-digit dealer inventory decline by year-end; disciplined wholesale alignment .
  • Small displacement pipeline: “Sprint” entry price targeted below $6,000; management expects profitable entry-level and iconic classic cruiser introductions .

Estimates Context

  • Q2 2025 revenue beat ($1,307M vs $1,096M*), driven by favorable pricing/FX and HDFS resilience, while EPS missed ($0.88 vs $0.93*) due to lower operating leverage and tariff costs [GetEstimates: Revenue Consensus Mean*] [GetEstimates: Primary EPS Consensus Mean*].
  • Prior quarter (Q1 2025) delivered broad beats on both revenue and EPS vs consensus, reflecting better mix and tight OpEx control despite soft retail [GetEstimates: Revenue Consensus Mean*] [GetEstimates: Primary EPS Consensus Mean*].
  • Consensus likely to revise HDFS trajectory higher given explicit guidance lift and transaction mechanics, while HDMC margins remain constrained near term by volume and tariffs .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Capital-light HDFS unlock: ~$1.25B cash distribution plus recurring fee streams should lower consolidated risk, support ~$500M H2 buybacks, and improve HDFS ROE — a near-term support for equity value .
  • Near-term margin pressure persists: HDMC operating margin compressed to 5.9% on reduced shipments and $13M tariff hit; expect continued margin sensitivity until volume normalizes and tariff mitigation progresses .
  • Tariff outlook improved: FY25 direct cost range cut to $50–$85M; if EU agreement solidifies and supply chain shifts proceed, estimate risk narrows and margin visibility improves .
  • Demand signs: NA dealer traffic improving sequentially; inclusion of motorcycle loan interest in new U.S. tax deduction is a potential demand tailwind into H2/Holiday season .
  • Product cycle: Entry-level “Sprint” (<$6k) and classic cruiser can broaden the funnel with expected profitability, supporting medium-term unit recovery and mix diversification .
  • Execution focus: AI-enabled efficiency program and continued inventory discipline are critical levers to defend margins in a high-rate environment .
  • Positioning: The strategic HDFS deal de-risks funding and highlights intrinsic value, but HDMC recovery is needed for sustained multiple expansion; watch tariff updates, NA retail cadence, and buyback execution as trading catalysts .