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From the WSJ:

But it isn't hard to see why the company attracts attention. It throws off heaps of cash and has a clean balance sheet. Last year Harley posted $1.8 billion in earnings before interest, taxes, depreciation and amortization on $5.8 billion of sales.

Numbers like that should make potential buyers salivate. But squeezing much additional profit from a company that posts net margins of nearly 18% would be hard for either a strategic acquirer or buyout shop.

Still, there are other reasons to own Harley's stock. Its earnings this year have been hit by a strike in February at its York, Pa., factory. Yet analysts expect profit growth of nearly 12% next year. And international sales, which account for about a fifth of its business, are booming in Europe and Japan. The company has barely scratched the surface in emerging markets such as China.

Moreover, Harley has doubled its dividend in the past two years. With a current valuation roughly in line with the market, solid earnings growth and a healthy balance sheet, Harley could support a share price of $80 -- a third higher than now. There's clearly room for this hog to run.

As I mentioned before, HOG has been the worst-performing stock on the Buy List this year. It was our third-best stock last year. The next earnings report, which is due on July 19, will be very interesting to see. The market currently expects $1.13 a share, which seems low.

Posted by edelfenbein at July 1, 2007 12:23 AM