Harman International Industries Inc. (HAR) reported adjusted earnings of $1.79 per share in the second quarter of fiscal 2015, which beat the Zacks Consensus Estimate of $1.29. Earnings per share soared 64% from $1.09 in the year-ago quarter.
Revenues
Revenues of $1,584 million beat the Zacks Consensus Estimate of $1,495 million and grew 19% year over year. The year-over-year increase was primarily due to strong sales in the Infotainment segment.
Infotainment net sales rose 12% from the year-ago quarter to $774 million, primarily due to expansion of the newly launched platforms, higher automotive production and increased take rates.
Lifestyle net sales improved 26% on a year-over-year basis to $541 million due to robust sales in Harman’s home and multimedia product lines and car audio business.
Professional division net sales increased 29% from the year-ago quarter to $267 million, primarily driven by the acquisition of AMX LLC which added video switching and enterprise automation to the product portfolio.
Margins
In the reported quarter, adjusted gross margin expanded 155 basis points (bps) on a year-over-year basis due to higher sales volume on fixed production costs along with favorable product mix.
Selling, general and administrative (SG&A) expense, as a percentage of revenues, declined 59 bps on a year-over-year basis to 20% on the back of improved operating leverage due to higher sales.
Infotainment operating margin expanded 140 bps, partly offset by 20 bps and 250 bps contractions, respectively, in Lifestyle and Professional operating margin.
Guidance
For fiscal 2015, the company expects revenues of $6 billion, EBITDA of $715 million and earnings per share of $5.25.
Balance Sheet & Cash Flow
As of Dec 31, 2014, cash and cash equivalents were $510.3 million compared with $581.3 million as of Jun 30, 2014. Long-term debt was $198.8 million at quarter-end compared with $219.4 million as on Jun 30, 2014.
Our Take
We believe that Harman’s new manufacturing capacities, growing product pipeline, solid patent portfolio, new awards as well as product launches will boost the top line and profitability in fiscal 2015 and beyond.
Moreover, Harman continues to benefit from its partnerships with the likes of Apple and Google, which is a significant positive. However, intensifying competition from Sony Corp. remains a concern.
Currently, Harman carries a Zacks Rank #4 (Sell).
Some stocks in this sector worth considering are Skullcandy, Inc. (SKUL), Audience, Inc. (ADNC) and GoPro, Inc. (GPRO). While Skullcandy sports a Zacks Rank #1 (Strong Buy), Audience and GoPro carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment