Harley-Davidson Profit Drops; Stock Pops

Updated to include comment on the movement in Harley-Davidson shares Thursday

NEW YORK (TheStreet) -- The third period was unkind to the motorcycle business, at least judging by Harley-Davidson's(HOG Quote) latest quarterly report, issued before the opening bell Thursday morning.

But investors bid the company's stock up 5.4% in afternoon trading, perhaps reacting to a plan also announced by Harley to jettison its Buell motorcycle brand and sell its MV Agusta unit, an Italian cycle maker, as soon as it can.

Heavy buying in Harley shares ahead of the company's earnings report yielded to selling at the open of Thursday's session, with the stock plunging 7% in the early going. But it staged a dramatic reversal through the rest of the day, perhaps as investors delved into the company's report a bit and saw that the results "weren't as disastrous as some were expecting," says Steven Spencer, a trader and partner at SMB Capital in New York.

Add in a probable short squeeze as Harley shares began advancing -- some 17% of the company's float was in the hands of short sellers as of Sept. 25 -- and the intraday rally intensified.

Harley stock closed Thursday at $27.69, up $1.43, or 5.45%. Volume reached nearly 17 million shares, more than three times the daily average turnover in the name.

Harley's results appeared to suggest that slackening demand for Harley hogs -- a discretionary item if ever there was one -- may finally have slowed down.

The iconic Milwaukee-based chopper maker said its profit cratered by 84% to $26.5 million, or 11 cents a share.

But that included a $14.2 million charge to pay for the shuttering of Buell and a write-down of $18.9 million in the value of MV Agusta, which specializes in racing bikes.

Harley policy is to refrain from providing non-GAAP figures, so it didn't strip out the charges from its EPS number. With 233.9 million shares outstanding, however, the charges would translate to roughly 14 cents on a per-share basis.