Morgan Stanley analyst Adam Jonas reduced his 2020 motorcycle operating margin forecast to the low end of management's guidance following Harley-Davidson's lower than expected Q4 profits and guidance and lowered his adjusted EPS forecast accordingly. While he cut his price target on Harley shares to $40 from $43, he keeps an Overweight rating on the stock as he believes that free cash flow yield is strong enough to support continued return of cash through buybacks and dividends. While he acknowledges that whether he is right on his Overweight call "will come down to whether management's efforts to stop the decline in demand do not come at a disproportionate sacrifice to margins and brand value," for now Jonas said he is "willing to take the leap."
Says no sustained down time in factories to date. Expects FY21 tariff exposure of $80M vs. prior view of $135M. Says seeing increased consumer appetite for products, brand. Says seeing "outstanding sell through" from Pan America motorcycle. Says inventory levels lower than originally planned due to strong demand. Says chip shortages constraining motorcycle inventory levels. Says seeing input costs increases in steel, aluminum.