Figma Shares Indicated To Open $105/$110
Harley-Davidson Inc. (NYSE:HOG) shares jumped over 15% in pre-market trading after the iconic motorcycle manufacturer announced a major financial services transaction while reporting significant declines in motorcycle sales and profitability for Q2 2025. The company’s presentation, delivered on July 30, 2025, detailed a strategic partnership with investment firms KKR and PIMCO that will transform its financing arm into a "capital-light" model and generate substantial cash for the company.
Transaction (JO:NTUJ) Highlights & Strategic Implications
The centerpiece of Harley-Davidson’s presentation was the announcement of a transformative transaction for Harley-Davidson Financial Services (HDFS). According to the company, strategic partners KKR and PIMCO have valued the HDFS business at approximately 1.75 times post-transaction book value. The deal involves selling a 4.9% common equity interest to investment vehicles managed by each firm and the sale of approximately two-thirds of HDFS future retail loan originations at a premium for five years.
As shown in the following slide detailing the transaction highlights, the deal is expected to unlock $1.25 billion in discretionary cash, representing approximately 40% of Harley-Davidson’s current market capitalization:
The transaction will significantly transform HDFS’s business model, with the company selling over $5 billion of existing gross consumer retail loan receivables and residual interests in securitized consumer loan receivables at a premium. Management plans to use the proceeds strategically, with $500 million allocated for share repurchases, approximately $450 million for debt reduction, and the remainder for reinvestment in the motorcycle business.
As illustrated in the following slide, the transaction is designed to achieve several key objectives while maintaining Harley-Davidson’s control over HDFS:
Quarterly Performance Analysis
Despite the positive reception to the HDFS transaction, Harley-Davidson’s core motorcycle business faced significant challenges in Q2 2025. The company reported diluted earnings per share of $0.88, down 46% year-over-year, with HDMC (Harley-Davidson Motor Company) revenue declining 23% to $1,044 million.
The following consolidated results slide shows performance across all segments:
The company’s motorcycle segment was particularly hard hit, with operating income margin dropping to 5.9% from 14.7% in the prior year quarter. Global motorcycle shipments decreased 28%, which the company attributed primarily to planned dealer inventory reduction efforts. Global retail sales were down 15% year-over-year.
A detailed breakdown of the factors affecting HDMC’s operating margin reveals that volume declines and manufacturing inefficiencies were the primary drivers of the deterioration:
The LiveWire electric motorcycle division showed some improvement, with operating losses reduced by 34% in Q2 and 33% year-to-date compared to 2024. However, motorcycle unit sales were down 65% year-over-year, though electric bicycle units increased by 25%.
Operational Challenges & Market Position
Harley-Davidson’s presentation highlighted several operational challenges, with tariffs emerging as a growing concern. The company reported that new or increased tariffs implemented in 2025 had a $13 million impact in Q2 alone, with potential full-year impacts ranging from $50 million to $85 million.
The following slide details the current tariff situation facing the company:
Despite these challenges, Harley-Davidson maintained strong market positions in key segments. In the U.S., the company held 32% market share in the 601+cc motorcycle category during Q2, with particularly dominant positions in touring (67%) and cruiser (53%) segments. European market share was significantly lower at 4%.
The company’s inventory reduction strategy appears to be working, with worldwide dealer inventory units down from 68,000 in Q2 2024 to 49,000 in Q2 2025, as shown in the following retail sales and inventory slide:
Capital Allocation & Outlook
Harley-Davidson has continued its shareholder return program, with $87 million in shares repurchased on a discretionary basis in the first half of 2025, representing 3.4 million shares. The company has returned a total of $1.5 billion to shareholders since 2022 through a combination of share repurchases ($1.2 billion) and cash dividends ($325 million).
As illustrated in the following capital return slide, Harley-Davidson remains committed to its previously announced plan to repurchase $1 billion of its shares through 2026:
Looking forward, the company has withdrawn its 2025 revenue and operating income margin guidance for the motorcycle segment, which was initially withdrawn in May 2025. For HDFS, operating income is expected to be between $525 million and $550 million, including $275-300 million from the transaction expected in fiscal year 2025. LiveWire’s operating loss is projected at $59-69 million.
Market Reaction
The pre-market surge in Harley-Davidson’s stock price suggests investors are responding positively to the HDFS transaction despite the weak quarterly results. According to available data, HOG shares were up 15.29% in pre-market trading to $26.46, following a previous close of $22.95.
This reaction represents a significant reversal for a stock that had been under pressure, having fallen nearly 29% over the six months prior to the Q1 earnings report. The transaction appears to be viewed as a strategic pivot that could provide Harley-Davidson with additional financial flexibility while reducing capital requirements in its financial services business.
The post-transaction HDFS is expected to have a significantly increased return on equity and double-digit operating income growth starting in 2027, according to management projections. This transformation, combined with the substantial cash infusion, may provide Harley-Davidson with resources to navigate the challenging motorcycle market while continuing to return capital to shareholders.
Full presentation:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.