Harley-Davidson Investors Are Caught in the Middle

One of the iconic American companies caught in the crosshairs of President Donald Trump’s international trade war is Harley-Davidson Inc (NYSE: HOG). HOG stock is down nearly 9 percent in the past five days and 20 percent year-to-date, and analysts say there’s still too much uncertainty for long-term investors to buy the dip.

Trump implemented tariffs on European steel and aluminum earlier this year, prompting the European Union to respond with its own tariff on motorcycles made in the U.S. On Monday, Harley-Davidson said EU tariffs on imported motorcycles have jumped from 6 percent to 31 percent, or roughly $2,200 per motorcycle. Tariffs in Europe are now so high that Harley-Davidson says it is shifting some production overseas.

Trump fired back at Harley-Davidson on Twitter Tuesday morning, threatening the company in a series of tweets.

A Harley-Davidson should never be built in another country-never! Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end – they surrendered, they quit! The Aura will be gone and they will be taxed like never before!

Trump said.

Following Monday’s disclosure from Harley-Davidson about the impact of the new European tariffs, CFRA analyst Efraim Levy lowered his 2018 Harley-Davidson earnings per share estimate by about 4.1 percent from $3.60 to $3.45. Levy says Harley-Davidson’s 2018 business will certainly take a hit, but shifting production overseas may not be necessary.

While we see a potentially greater cost impact in ’19, we are not yet adjusting our EPS projection, as we think there could be a resolution before ’19 to mitigate the profit impact

Lecy says.

At this point, CFRA is not including potential costs of Harley-Davidson shifting its production abroad. “The production shift outside the U.S. would be an ironic response to the Trump administration’s trade policies given its desire to increase U.S. manufacturing activity and jobs,” Levy says.

HOG stock has suffered so far this year, but unless the trade war drags on into 2019 or escalates further, Levy sees limited additional downside.

CFRA has a “hold” rating and $47 price target for HOG stock.

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