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Harley-Davidson (HOG, -2%) and Polaris (PII, +7.5%) issued contrasting earnings reports before the bell today. The maker of the iconic Harley missed earnings expectations by a wide margin, but Polaris, which makes off-road vehicles and snowmobiles as well as motorcycles, blew past forecasts and is experiencing unprecedented demand.

The stocks are reacting accordingly. Both companies are navigating the same pandemic problems, with production facilities and dealership closed. But while Polaris is executing and confident enough to reinstate full-year guidance, Harley-Davidson is still struggling with a turnaround that has turned into a “total rewire,” with closing of international markets and cutting planned models.

The motorcycle and alternative vehicle market as a whole has never been hotter, though. The lockdown has unleashed demand for a sort of alternative transport market of motorcycles, off-road bikes and ATVs and RVs. Those with disposable income are looking to long-haul trips, solo travel and away from carpools and commutes.

The change in monthly change in total vehicle sales started rebounding in April. It eased off in June from its recovery, but is still above levels of the year-ago period. And motorcycle sales began booming in May, according to dealerships.

“We overcame a near complete shutdown of both our dealers and the U.S. economy early in the quarter to capitalize on unprecedented retail demand for our Off-Road Vehicles and Motorcycles through May, June and now July,” Polaris CEO Scott Wine said.

For Polaris, North American retail sales jumped 57% in the quarter, with off-road vehicle and motorcycle sales “up significantly”. That demand, combined with lower shipments and production suspension led to a 47% plunge in dealer inventory levels.

Customers are having a tough time getting a hold of Harleys as well.

“More of our contacts are complaining of insufficient inventories than at any time during the 14 years we have been conducting our dealer survey,” analyst James Hardiman said in a note. “Sales for all motorcycle manufacturers, and especially Harley-Davidson, have been held back by a lack of inventory which has reached the lowest levels many of our contacts have ever seen. On the flip side, the lack of inventory and Harley’s widely reported reduction in production has resulted in a run on the available units, particularly used models which are said to be selling even faster than new.”

If Polaris can ramp up production it looks like it will still have time to cash in on the unprecedented demand. But conversely, Harley-Davidson could benefit from building brand interest in the used market and a prolonged constraint on inventories as it right-sizes its plans for new models.

Harley highlighted global dealer inventory down 32% as a Q2 success of The Rewire. Polaris has a bullish Quant Rating, helped particularly by EPS revisions, while Harley-Davidson is rated neutral, hindered by very weak growth.

Article Retrieved from Seeking Alpha.