Harley Davidon shares jump 16% after plans to monetise finance unit to private equity

Shares of Harley-Davidson Inc. surged as much as 24% on Wednesday—their biggest gain since October 2020—after the iconic motorcycle manufacturer announced a major monetization effort involving its finance arm.

The company revealed plans to sell a nearly 10% stake in Harley-Davidson Financial Services (HDFS) and more than $5 billion in retail loans to investment giants KKR & Co. and Pacific Investment Management Co. (PIMCO).

While the deal boosted investor sentiment, Harley-Davidson also reported disappointing second-quarter results, with sharp declines in revenue, motorcycle shipments, and earnings, driven in part by tariffs and high borrowing costs.

At the time of writing, Harley Davidson shares were trading 16.58% higher at $26.76.

Finance unit stake sale unlocks capital for growth

Harley-Davidson said in a statement that KKR and PIMCO will each acquire a 4.9% common equity interest in HDFS, alongside the purchase of retail loan receivables at a premium to face value.

The transaction is expected to unlock approximately $1.25 billion in cash for the company.

Harley plans to allocate those funds toward reinvestment in its core business, debt reduction of around $450 million, and approximately $500 million in returns to shareholders, including a resumption of share buybacks.

The company had suspended repurchases during the second quarter due to tariff uncertainty.

CEO Jochen Zeitz said the partnership would provide a “long-term stable funding mechanism” for the finance unit while maintaining continuity for customers and dealers. Importantly, Harley-Davidson will retain control of HDFS.

The announcement came on the same day as Harley Davidson announced their second-quarter earnings release.

Tariffs and economic headwinds pressure Q2 results

Despite the positive market reaction to the finance deal, Harley-Davidson's second-quarter financial results underscored the challenges the company continues to face.

Revenue fell 19% year-over-year to $1.3 billion, missing analyst expectations, while earnings per share declined 46% to 88 cents.

Global retail motorcycle sales dropped 15%, including a 17% decline in the critical North American market.

Motorcycle shipments plummeted 28% from the prior year, a drop attributed to weakening demand amid elevated interest rates and tariff-related production cuts.

The company reported $17 million in tariff costs during the first half of 2025 and forecasted a full-year impact of up to $85 million.

These costs shaved 125 basis points off Harley’s second-quarter operating income margin, according to Chief Financial Officer Jonathan Root.

CEO Zeitz highlighted ongoing engagement with governments and expressed “cautious optimism” that future trade agreements could reduce the impact of tariffs on the company’s operations.

However, he acknowledged that global trade uncertainty and weak consumer sentiment remain significant hurdles.

Strategic initiatives signal path forward

To combat these headwinds, Harley-Davidson is pursuing several strategic initiatives.

The company plans to launch a new sub-$6,000 motorcycle next year to attract cost-conscious buyers and broaden its customer base.

Additionally, Harley is implementing a new efficiency program that leverages artificial intelligence to drive productivity and cost savings.

The company is also in a leadership transition, with Zeitz having announced his intention to resign in April. A CEO search is currently underway.