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Harley-Davidson’s Profit Beats Estimates, Shares Rally

Harley-Davidson’s Profit Beats Estimates, Shares RallyHarley-Davidson’s Profit Beats Estimates, Shares Rally

Harley-Davidson Inc’s shares rallied on Tuesday after the motorcycle maker forecast a lower-than-expected hit to profit margins from US President Donald Trump’s trade tariffs and its quarterly earnings topped Wall Street estimates.

The forecast and results raised hopes 2018 profits will hold up better than expected, despite obstacles such as rising raw materials costs, higher tariffs on bikes shipped to Europe and an aging customer base, Reuters reported.

Harley’s shares opened higher on Tuesday and soared over 9%, recovering most of their losses since late June, when Trump attacked the company for planning to move production for European customers overseas. The stock closed up nearly 8% at $44.63.

The Milwaukee, Wisconsin-based company now expects its motorcycles segment operating margin as a percent of revenue to be about 9% to 10% in 2018, compared with the 9.5% to 10.5% it projected earlier.

The drop was due to higher steel and aluminum costs and a 25% retaliatory duty imposed by the European Union on the shipments from the United States. Those two factors together are estimated to cost Harley $45 million to $55 million this year.

The company expects to absorb half of the increased costs through disciplined business management.

“We are making every effort to mitigate the costs of those tariffs,” Chief Financial Officer John Olin told analysts on a conference call.

Harley’s second-quarter net income fell to $248.3 million, or $1.45 per share in the second quarter ended July 1, from $258.9 million, or $1.48 per share, a year earlier. That exceeded analyst estimates of $1.34 per share, according to Thomson Reuters I/B/E/S.

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