Harley-Davidson's Q1 2025: EPS Beats Expectations, but Revenue Declines Highlight Structural Challenges

Harley-Davidson (NYSE: HOG) delivered mixed results for its first quarter of 2025, with earnings per share (EPS) narrowly beating estimates despite a sharp revenue decline. While cost-cutting and financial services resilience provided some solace, broader concerns linger over declining motorcycle demand, LiveWire’s struggles, and escalating tariff risks.

Key Financial Highlights

• Revenue: Consolidated revenue fell 23% year-over-year (YoY) to $1.329 billion, driven by a 27% drop in Harley-Davidson Motor Company (HDMC) revenue to $1.08 billion.
• Net Income: Dropped 43% to $133 million, but EPS of $1.07 edged above analyst expectations.
• LiveWire: Electric motorcycle sales plummeted 72% to just 33 units, with revenue collapsing 42% to $3 million.

Motorcycle Sales Decline: A Global Issue

Global motorcycle retail sales fell 21% YoY to 31,000 units, with North America leading the slump (-24%) amid high interest rates and consumer caution. Asia-Pacific (APAC) sales collapsed 28%, reflecting weakness in China and Japan. Even Harley’s financial services arm (HDFS) reported revenue declines, though its operating income rose 19% to $64 million due to lower credit losses.

LiveWire’s Struggles: A Strategic Crossroads

The electric motorcycle division remains a critical concern. With sales down 72% and operating losses narrowing only slightly to $20 million, management confirmed it will halt further direct investments in LiveWire beyond existing credit facilities. This decision underscores the segment’s lack of profitability and the company’s prioritization of cash preservation.

Tariffs and Trade: A Growing Headwind

Harley faces escalating tariff costs, projected at $130–$175 million in 2025—primarily from China. These tariffs, driven by geopolitical trade tensions, are squeezing margins. The company is adjusting supply chains, including U.S. manufacturing and Thailand-based assembly, but the full impact remains uncertain.

Strategic Shifts and Governance Risks

Harley announced plans to:
1. Launch entry-level cruisers (601–1,200cc) for 2026 to revive profitability in a historically money-losing segment.
2. Revert to fall product launches to align with dealer preferences and extend the selling season.
3. Explore strategic partnerships for HDFS to reduce funding costs without selling the division.

However, the boardroom battle with activist investor H Partners adds to the uncertainty. The group is pushing for leadership changes, including CEO Jochen Zeitz’s removal, at the May 14 shareholder meeting.

Cash Position and Share Repurchases

Harley’s liquidity remains strong, with $1.9 billion in cash and equivalents. The company repurchased $87 million of shares in Q1 and maintained a $23 million dividend. Despite this, the withdrawal of full-year 2025 guidance signals caution about macroeconomic and tariff risks.

Investor Takeaways

• Short-Term Resilience: Cost discipline (e.g., $24 million in productivity savings) and HDFS’s strong performance provide near-term stability.
• Long-Term Risks: Declining motorcycle demand, LiveWire’s underperformance, and tariff pressures threaten Harley’s growth trajectory.
• Valuation: Shares fell 1.75% post-earnings, reflecting investor skepticism about Harley’s ability to navigate these challenges.

Conclusion

Harley-Davidson’s Q1 results highlight a company at a crossroads. While EPS beat expectations and HDFS delivered resilience, the broader narrative is one of declining legacy sales, LiveWire’s failure to gain traction, and rising operational risks. The stock’s underperformance post-earnings suggests investors are pricing in these challenges.

Key data points reinforce the caution:
- Revenue declines: The 23% YoY drop in revenue underscores a fundamental demand issue, especially in critical markets like North America and APAC.
- LiveWire’s stagnation: With sales down 72%, the segment’s inability to scale threatens Harley’s EV future.
- Tariff costs: The $130–$175 million tariff burden could offset cost-saving measures, squeezing margins further.

Investors should weigh Harley’s strong cash position and brand legacy against its structural challenges. While the entry-level cruiser strategy and supply chain adjustments offer hope, sustained success will require a turnaround in motorcycle sales, progress in LiveWire, and resolution of governance disputes. Until then, Harley remains a high-risk, speculative play for investors willing to bet on a revival of its iconic brand.