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Harley-Davidson Shares Roar Higher on Buyout Speculation


Harley-Davidson, Inc. HOG saw its share price surge 7.3% to $54.12 on Sep 21, 2016 due to the rumor that the company may be acquired by private equity firm, KKR & Co. L.P. KKR. Rumors of a possible takeover of Harley-Davidson by KKR & Co. had surfaced in 2010 as well as in July this year. However, by midday, CNBC and Reuters reported the company’s spokesmen denying knowledge of a takeover and confirming the rumors to be unfounded. Shares of the company closed 3.9% higher at $52.42.

Milwaukee, WI-based Harley-Davidson is the world’s leading designer and manufacturer of heavyweight motorcycles, and related products and merchandise. The company’s products are sold mainly in North America, Europe, Middle East and Africa (EMEA), the Asia-Pacific, and Latin America.

Harley-Davidson is facing challenges due to a strong U.S. dollar and increased competition. In fact, these hurdles have resulted in the reduction of more than 200 workers and a $70 million investment for marketing and product development.

Recently, Harley-Davidson also agreed to a $15 million settlement with the Environmental Protection Agency (EPA) related to its “super tuners” which bolstered power but released harmful emissions. Per the deal, the company will buy back all of the devices and discontinue future sales of the product. These actions will add to its expenses.

In addition, Harley-Davidson has been witnessing declining retail sales of new motorcycles caused by a fall in the prices of used bikes. This has adversely affected its revenues and market share. In 2016, management expects stiff competition to hurt retail sales, as competitors rely on discounts and product introduction to boost sales. Further, it expects headwinds from macro-economic challenges in some regions.

Meanwhile, Harley-Davidson remains focused on successful penetration in foreign markets for future growth. Moreover, the company aims to expand its product portfolio to increase its customer base, while already commanding a large share in the U.S. motorcycle market.

Zacks Rank

Harley-Davidson currently carries a Zacks Rank #3 (Hold).

Some better-ranked auto stocks include Standard Motor Products Inc. SMP and Douglas Dynamics, Inc. PLOW, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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