Harley-Davidson Inc reported stronger-than-expected earnings on Thursday, and reiterated its full-year shipment forecast, saying it was mildly encouraged by sales trends in the United States, its biggest market by far.

The results and outlook sent the motorcycle maker's shares surging as much as 8 percent in premarket trading.

Harley-Davidson, which has already laid off 20 percent of its workforce and closed several plants, warned its cost-cutting efforts would continue and that 300 to 400 more jobs would be eliminated over the next two years. It said costs from the continuing revamp could reach $150 million over the next two years.

Harley reported first-quarter net income of $117.3 million, or 50 cents a share, down from $187.6 million, or 79 cents a share, a year earlier.

Analysts, on average, had expected the company to report a profit of 52 cents a share, according to Reuters Estimates.

But the latest results included $34.9 million in restructuring charges and a $22.5 million charge related to a change in Wisconsin tax law that the company complained had been enacted mid-quarter without public hearings and which applied retroactively to January 1.

Citi analyst Gregory Badishkanian estimated the unexpected tax charge alone cost the company 10 cents a share in earnings.

Sales, including parts and accessories, slipped about 1 percent to $1.29 billion. But sales of its iconic bikes, which account for the lion's share of its revenue, fell 12 percent, pulled down by 17.2 percent decline in Canadian sales.

Retail sales of Harley-Davidson motorcyles in the United States, which accounts for 65 percent of the company's revenue, fell 9.7 percent in the quarter. That represented an improvement over previous quarters. In the fourth quarter of 2008, the company reported that U.S. retail sales tumbled 19.6 percent and in the third quarter of 2008, U.S. retail sales fell 15.5 percent.

Badishkanian called the sales data better than expected and predicted Harley's shares, which have more than doubled in value over the past six weeks, would react positively.

Harley-Davidson also affirmed its plans to ship between 264,000 and 273,000 Harley-Davidson motorcycles to dealers worldwide in 2009. It said it plans to ship 55,000 to 59,000 during the current quarter, down from 74,760 in the first quarter.

(Reporting by James Kelleher; Editing by Lisa Von Ahn, Dave Zimmerman)