UPDATE 2-Harley profit shy of estimates, raises margin target

* Fourth-qtr profit of 31 cts/share below 32 cent consensus

* Revenue declines 1.5 percent

* Sees 2013 motorcycle shipments up 4.5 pct to 6.5 pct

Jan 29 (Reuters) - Harley-Davidson Inc on Tuesday reported fourth-quarter net income slightly below Wall Street estimates, as it shipped fewer motorcycles while phasing in new software control systems at its main U.S. factories.

Faced with an uncertain economic environment at home and abroad, the U.S. manufacturer has been focused on making each sale more profitable, and forecast that 2013 operating margin would rise to between 35.25 percent and 36.25 percent of sales, up from 34.8 percent last year.

That forecast increase is tied to new computer-controlled manufacturing systems Harley is phasing in at its big factories in York, Pennsylvania, and Kansas City, Missouri, which will allow it to produce motorcycles in response to demand, rather than building as much inventory as it has historically carried.

"I like the changes that are being made and in the near term there could be some upside," said Jaime Katz, an analyst at Morningstar in Chicago. "But looking out further into 2014 and beyond, it becomes a little bit harder to capture margin gains and capture market share."

The company said profit was $70.6 million, or 31 cents per share, compared with $105.7 million, or 46 cents per share a year earlier.

Analysts, on average, had expected Harley to earn 32 cents per share in the quarter, according to Thomson Reuters I/B/E/S.

Revenue declined 1.5 percent to $1.01 billion from $1.03 billion a year earlier.

Retail sales of motorcycles by Harley's dealers - a measure of end-market demand - rose 8.4 percent in the United States, Harley's largest market, in the quarter. Outside the United States, the company saw declines in Canada and Europe, while retail sales rose in Asia and Latin America.

Milwaukee-based Harley said it expects to ship 4.5 percent to 6.5 percent more motorcycles in 2013 than it did last year, and plans $200 million to $220 million in capital expenditures.

Harley's rivals including Japan's Honda Motor Co, Suzuki Motor Corp and Yamaha Motor Co, as well as Italy's Ducati, which is owned by Volkswagen AG.

As of Monday's close, Harley shares have risen about 20 percent over the past year, outpacing the 14 percent rise of the broad Standard & Poor's 500 index.

Its shares were little changed in premarket trading, rising 23 cents to $53.43.