A developer of audio products and electronic systems,
Harman International Industries
Inc.
(
HAR
) reported third quarter 2012 earnings of 74 cents per share, ahead
of the Zacks Consensus Estimate of 66 cents. Earnings increased
23.3% year over year from 60 cents per share.
Quarter Details
Revenues increased 15.6% year over year to $1.09 billion in the
third quarter of 2012. Revenue also surpassed the Zacks Consensus
Estimate of $1.06 billion. The strong year-over-year growth was
driven by growth across all business segments.
Segment-wise, Infotainment revenue increased 15.1% from the
previous-year quarter to $610.0 million. The Lifestyle division
revenue jumped 20.3% year over year to $332.0 million and the
Professional division witnessed a year-over-year growth of 7.7% to
reach $153.0 million in the reported quarter.
Non-GAAP gross profit increased 17.2% year over year to $293.0
million. Gross margin increased 40 basis points (bps) to 26.8% in
the quarter on the back of higher revenue base. Gross margin for
the Infotainment division increased 400 bps to 23.0% in the
reported quarter on a year-over-year basis. However, the same for
Lifestyle and Professional division decreased 510 bps and 180 bps,
respectively, in the reported quarter.
Selling, general and administrative (SG&A) expense increased
20.8% year over year to $226.0 million in the third quarter.
Operating income was up 6.3% year over year to $67.0 million.
Operating margin contracted 60 bps to 6.1% due to higher SG&A
expense. Net income was $53.0 million, up 23.3% year over year from
$43.0 million in the prior-year quarter.
Balance Sheet
As of March 31, 2012, cash and cash equivalents were $640.6
million compared with $544.8 million as of December 31, 2011.
Recommendation
Harman posted solid third quarter figures on the back of robust
sales from all its business segments. The Infotainment segment has
done particularly well in garnering new orders from automakers. The
company's expansion in the BRIC (Brazil, Russia, India and China)
countries is expected to pave the way for achieving the projected
revenue of $1.5 billion in the next three years from the
region.
Moreover, Harman boasts a solid product pipeline that is
supported by more than 4000 patents, and the company intends to
roll out new infotainment products in order to further drive
sales.
However, Harman continues to face tough competition from
Panasonic Corp.
(
PC
) and
Sony Corp.
(
SNE
), which may hurt its profitability going forward.
We maintain our Neutral recommendation on a long-term basis
(6-12 months). Currently, Harman has a Zacks #3 Rank, which implies
a Hold rating on a short-term basis (1-3 months).
HARMAN INTL IND (
HAR
): Free Stock Analysis Report
PANASONIC CORP (
PC
): Free Stock Analysis Report
SONY CORP ADR (
SNE
): Free Stock Analysis Report
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