HARMAN designs and makes audio, visual and infotainment systems for the automotive, consumer and professional markets.
More than 80% of the world’s luxury cars are equipped with HARMAN audio and infotainment systems worldwide. Its brands include AKG, Harman Kardon, Infinity, JBL, Lexicon, Mark Levinson and Revel.
Big Beat in the Fiscal Second Quarter
On Jan 29, HARMAN reported its fiscal second quarter results and crushed the Zacks Consensus by 38.8%. Earnings were $1.79 versus the Zacks Consensus of just $1.29.
It was HARMAN’s eighth earnings beat in a row.
Sales rose 19% to $1.6 billion compared to a year ago. It’s facing foreign currency headwinds however. Without the exchange issues, sales would have been up 24%.
The gains were due to platform expansion and strong automotive production.
Its two strongest divisions were Lifestyle and Professional.
Lifestyle sales rose 26% (or 31% ex-currency) due to strong demand for the home and multimedia lines and higher automobile production.
Professional division sales jumped 29% (or 32% ex-currency) due to the expansion of the Company’s product line into enterprise automation and control and video switching.
Raised Full Year Guidance
Despite the currency headwinds, HARMAN raised full year guidance to $5.85 from its previous guidance of $5.25.
That is fiscal 2015 earnings growth of 33.6%.
Fiscal 2016 also looks bullish. Analysts are expecting another 19% earnings growth.
Red Bend Acquisition Closed
HARMAN isn’t afraid of using acquisitions to build-out its existing technology base.
On Mar 2, HARMAN completed the acquisition of Israeli-based Red Bed Software, which provides software management technology for connected devices and over-the-air (OTA) software and firmware upgrading services.
The deal was valued at $170 million, including $99 million in stock and $71 million cash.
Red Bend will keep its management team and operate as a separate unit within HARMAN.
Shares Near All-Time Highs
Investors have gotten wind of all the good news at Harman and have been jumping into the shares.
But even with the recent surge in share price, valuations aren’t over extended.
HARMAN is trading with a forward P/E of 22.6. While that’s above the average of the S&P 500 which is 16.8, for a high growth company it’s not an outrageous valuation.
For investors looking for growth in the hot automobile and infotainment areas, HARMAN is one stock to keep on the short list.
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