Many American "old-line" manufacturers are enjoying a rebirth, as they bring the latest technology to their assembly lines and eliminate inefficiencies. These U.S.-based companies are combining innovation with roll-up-your-sleeves manufacturing to give foreign competitors a run for their money.
But in this uplifting red-white-and-blue story, don't include Harley-Davidson (HOG) . This motorcycle manufacturer may be an American icon, but its stock is a dog.
Harley-Davidson is scheduled to release first quarter fiscal 2016 earnings before the opening bell on Tuesday, April 19. As will be made clear below, Harley-Davidson is a toxic stock to avoid right now. We'll also debunk the notion among some analysts that the stock is a good value play that faces a brighter 2016. The stock has nowhere to go but down.
Founded in 1903 by William Harley and Arthur Davidson, Harley-Davidson is the largest manufacturer of heavyweight motorcycles in the world. It's also one of the most familiar and beloved brands in the United States, made famous in countless motorcycle movies that romanticize the biker's life on the road.
So why, during an economic rebound that has generated more disposable income for consumers, has Harley-Davidson under-performed U.S. automakers such as General Motors and Ford, as well as the broader markets? Over the past two years, Harley Davidson has declined 20.21% and 28.42% each year, respectively, compared to a decline of only 1.05% and a gain of 9.81% over the same periods for the S&P 500 (SPY) .
Harley-Davidson's litany of woes includes poor customer satisfaction, high manufacturing costs, and brutal competition from overseas companies that are making stylish bikes that cost a lot less. The strong U.S. dollar also is hurting the company, by making its products more expensive overseas.
Further, Harley-Davidson is saddled with a heavily unionized workforce in factories in York, Pennsylvania; Milwaukee (where the company is based); and Kansas City, Mo. To be sure, Harley-Davidson's bikes also are assembled at facilities with lower cost workers in emerging nations such Brazil and India, but the company overall is stuck with stubbornly high overhead compared to foreign competitors.