We issued an updated research report on Harman International Industries Inc. HAR on Mar 31, 2015. The company reported impressive second-quarter 2015 results, beating the Zacks Consensus Estimate for both earnings and revenues.
Harman benefited from the growing automotive production globally. Strong demand for the company’s infotainment and car audio systems is a major positive. Harman’s leading cloud platform and scalable technology is likely to gain from the growing demand for connected cars.
Further, Harman is known for its diversified product portfolio. The company’s strong patent portfolio (approximately 5,300) helps it to launch products frequently across all its segments. In the recent 2015 International CES, the company unveiled several breakthrough products including the world's first headphones with personalized sound for both left and right ears, first gesture-controlled headphones and first smart sport headphone that can remove unwanted ambient noise.
The major highlight, however, was Harman Kardon Wireless High-definition Audio System, launched globally in the fiscal second quarter. Further, in 2015, Harman introduced the industry's first connected navigation solution based on the navigation data standards — Navigation Data Standard (NDS) — that incrementally updates map data in the field. Automaker, BMW was the first to deploy this technology across the NBT infotainment platform developed by Harman. We believe that Harman’s innovative and diversified product portfolio will continue to drive top line and profitability over the long term.
Harman faces tough competition in each of its product lines. In order to maintain its dominant market share, the company continues to spend a significant amount on research & development (R&D). Although Harman is utilizing R&D more efficiently, we believe that increasing competition will eventually put pricing under pressure. This may hurt margin expansion over the long term.
Further, Harman has made numerous acquisitions and is likely to continue doing so. Integration risks are a constant concern, since the competitive nature of the market necessitates acquisitions to maintain growth.
Currently, Harman has a Zacks Rank #2 (Buy). Other well-ranked stocks in this sector include Audience, Inc. ADNC, Skullcandy, Inc. SKUL and GoPro, Inc. GPRO. All have a Zacks Rank #2.
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