Harley-Davidson Stock Soars 20%. It Wasn’t Earnings.

*** ONE-TIME USE *** A Harley-Davidson logo is seen on a motorcycle parked outside Warr’s, Europe’s oldest authorised Harley-Davidson dealership in west London on April 4, 2025. (BENJAMIN CREMEL/AFP via Getty Images)

Shares of motorcycle maker Harley-Davidson soared after the company reported weaker-than-expected quarterly results. The disappointing numbers were overshadowed by a big deal for Harley’s financing division.

Harley, on Wednesday, reported second-quarter earnings of 88 cents a share from sales of $1.3 billion. That’s a notable earnings miss: Wall Street was looking for 96 cents a share from sales of $1.1 billion, according to FactSet. Results were also down from the year-ago quarter, when Harley reported per-share earnings of $1.63 from sales of $1.6 billion.

Still, shares were soaring. Harley stock traded as high as $28.55 before paring some of those gains, up 16% at $26.66 in midday trading. The S&P 500 and Dow Jones Industrial Average were up 0.2% and flat, respectively.

A deal helped investors look past a challenging environment. The company on Wednesday unveiled a deal between its financing unit, Harley-Davidson Financial Services, and KKR and PIMCO. HDFS provides loans, insurance, and other services for Harley buyers.

KKR and PIMCO were taking a 4.9% stake each in HDFS and were buying $5 billion in loans from the financing company. The deal values the business at 1.75 times book value.

“While our second quarter results continue to be impacted by a challenging commercial environment for discretionary products and an uncertain tariff situation, we are extremely pleased to announce a strategic partnership for HDFS with KKR and PIMCO that generates significant value for Harley-Davidson on all levels,” said Harley CEO Jochen Zeitz in a news release.

With the new partners, HDFS will function as a capital-light financing business. It will sell existing and future retail loans after origination.

Harley-Davidson will get $1.25 billion from the transaction. The company will use the cash “to reinvest to support demand-driven investments, reduce $450 million of [Harley] debt, and return approximately $500 million to shareholders.”

That’s significant money for Harley. Its market value is roughly $3 billion, and its debt is about $5 billion.

“We note that HDFS often contributes around 40% of Harley-Davidson’s earnings per share in a given year,” wrote UBS analyst Robin Farley in a Wednesday report. “So, the $1.25 billion of proceeds is in exchange for some of Harley-Davidson’s future income stream from the receivables and HDFS operating income.” She rates Harley shares Hold and has a $27 price target for the stock.

The “high-quality portfolio and significant asset generation capabilities exemplify the dynamic opportunities we are seeing in the asset-backed finance space as businesses continue to transition from capital-heavy to capital-light to optimize their balance sheets,” said Steve Sun, director at KKR. “We look forward to supporting the HDFS team in this long-term strategic partnership.”

Investors are looking forward to the partnership, too.

Coming into Wednesday trading, Harley-Davidson stock was down almost 40% over the past 12 months.

Write to Al Root at allen.root@dowjones.com