Stock pick: Rev up your portfolio with Harley-Davidson (HOG)

Making inroads in Japan

Chart showing trailing 12-month stock performance of Harley-Davidson

Need a stock to rev up your portfolio? Help you speed to the finish line? Something to rely on while you’re travelling down the highway that is life? OK, I’ll stop, but here’s the point: Harley-Davidson Inc. (NYSE: HOG) is more than just a motorcycle company—it’s also a reliable stock that many analysts suggest owning.

On January 30, the company announced its fourth quarter results and the news was good for investors. Its earnings per share climbed to $0.34, up 9% year-over-year, while worldwide sales increased 6%. Revenues also increased by about 2%. While these may not look like spectacular numbers, it is a decent showing for a large-cap auto stock.

Gerrick Johnson, an analyst with Bank of Montreal, points out that while the company did miss its own estimates—though it was in line with consensus numbers—he’s not worried. The polar vortex affected December sales, he wrote in a January 31 report, but all signs point to continued growth in 2014.

“We are confident that business is good, the brand is strong, and sales growth will accelerate through 2014,” he says. “We believe the company has provided encouraging, yet conservative, guidance, anticipating motorcycle shipments to grow 7% to 9% in 2014.”

Part of that growth is will come from consumers feeling more comfortable about spending. In 2009, worldwide motorcycle sales fell 41% over the year before, according to the Motorcycle Industry Council. While year-over-year sales are growing again, they are still almost 50% below where they were pre-recession.

Johnson says to pay particularly close attention to Japan, where domestic manufactures continue to lose ground in the country. Harley-Davidson sees a lot of potential there — it’s introducing new Street 500 and 750 bikes — and could start taking market share away from the sportier bike categories.

Valuation is also attractive . It’s trading at about 19 times earnings today — close to the S&P 500’s price-to-earnings ratio — but it’s trading at 13.7 times Johnson’s 2015 EPS estimate of $4.60.

The stock’s price is at about $65, but Johnson thinks it could hit $72 in the next 12 months. “This represents a compelling investment opportunity,” he says.