Harley-Davidson (HOG) could reduce shipments by 5% year-over-year in 2025, which is worse than the market's expectation of flat shipments, UBS said in a note Thursday.

The analysts, including Robin M. Farley, said the company's goal to maintain flat inventory for Q4 and its higher-margin expectations for 2025 suggest that the company may have initially expected retail growth in 2025, similar to its projections for 2024. However, the analysts think this is unlikely because they don't expect major model changes like the new Touring design last year. Retail declines in Q4 might have reduced their initial optimism.

The analysts also said they believe the company's US retail sales in October to November may have dropped by nearly double digits, following last year's Q4 declines, and early December checks also showed very negative results. Aside from macroeconomic factors like interest rates, dealers pointed to stricter credit requirements from Harley-Davidson Financial Services. The first quarter of 2025 is likely starting off weak, the analysts said, as California is the largest US state for motorcycle sales, accounting for around 10% of total US sales, and more during off-peak months in January to February. This could negatively impact Q1 sales.

The analysts estimate the adjusted earnings per share for fiscal year 2025 to be $3.81, which is below the street consensus estimate of $3.97. They also estimate that a 1% change in shipments will result in a 2-cent change in EPS.

UBS has a neutral rating and price target of $35 on Harley-Davidson.

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