Motorcycle maker Harley-Davidson Inc. said on Thursday quarterly earnings rose 19 percent boosted by foreign markets although shares fell due to a greater-than-expected decline in U.S. sales.

The company called the U.S. results disappointing and acknowledged that dealers had resorted to promotions and price cuts that resulted in some bikes selling below suggested prices. Shares fell to their lowest level in nearly four months.

Harley reported a second-quarter profit of $290.5 million, or $1.14 a share, compared with $243.4 million, or 91 cents a share, a year earlier.

Sales rose 17.7 percent to $1.62 billion.

Analysts, on average, had expected the Milwaukee-based company to earn $1.13 a share on sales of $1.64 billion, according to Reuters Estimates.

The second quarter is a key one for Harley because it coincides with the spring, the busiest time for its dealers in the United States, where the company sells more than half its bikes.

Harley said total dealer retail sales fell 1.2 percent during the quarter, pulled down by a 5.5 percent decline in sales in the United States, the company's biggest and most important market.

That was offset by a 13.4 percent increase in sales in markets outside the United States, including Japan and Canada.

Even so, in a statement, Jim Ziemer, the company's chief executive, acknowledged that the U.S. numbers for the first half of the year had not met our expectations, in part because the market for heavyweight motorcycles contracted 6.2 percent during the quarter.

He said the company would monitor -- and possibly scale back -- wholesale shipments during the rest of the year.

During a conference call, executives acknowledged the troubles in the U.S. credit world, sparked by home buyers who stretched themselves too far and are now having trouble making payments. Such troubles were creating an additional headwind for the company and resulting in higher delinquency rates and credit losses.

In a note to investors, Craig Kennison, an analyst at Robert W Baird, called the U.S. results disappointing and said Harley had hinted at a production cut.

Harley said it shipped 95,117 units during the second quarter, a 19.2 percent increase from the same quarter last year, and that it expected to ship between 91,000 and 95,000 bikes during the third quarter of 2007.

Earlier this week, Tim Conder, an analyst at A.G. Edwards & Sons, cut his forecast for Harley-Davidson's 2008 earnings because of concerns about shipment growth assumptions for the U.S. market.

Harley shares fell $1.43, or about 2.3 percent, at $59.74 on the New York Stock Exchange after earlier falling as much as 5 percent.

(Reporting by James B. Kelleher)

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