In this fast moving world, entertainment plays a great role. People are always busy and entertainment is the main source of relaxation. It can be in the mode of watching a movie or by listening to music. But, one thing common in the above two modes is the sound. Great sound quality makes movies more real and entertaining.
Audio guru Harman International Industries Inc. (NYSE:HAR) designs, manufactures, and markets a wide range of audio and infotainment solutions for the automotive, consumer, and professional markets. With a market cap of 7.412 billion, this Stamford, Connecticut, based company operates under three distinct reportable divisions – Infotainment, Lifestyle, and Professional – that market the corporation’s high-quality audio technology through different channels for unique end users. The brands in Harman’s portfolio include AKG, JBL, Infinity, Harman/Kardon, Lexicon, and Mark Levinson. The company is a supplier to some of the biggest names in the auto industry, including the Volkswagen Group (VLKAY), BMW (BAMXY), Daimler AG (DDAIF), and Toyota (NYSE:TM).
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- HAR 15-Year Financial Data
- The intrinsic value of HAR
- Peter Lynch Chart of HAR
Tracking the Performance
On January 30, 2014, Harman reported earnings of $1.09 per share in the second quarter of fiscal 2014. Earnings per share jumped 84.7% from the year-ago quarter. Revenues increased 25.8% from the year-ago quarter to $1.328 billion, and emerging market sales increased 50%. Harman’s strong performance across its business segments helped to increase its revenues. Non-GAAP operating income increased 90% to $108 million and generated $121 million cash from operations. The company also secured $1.1 billion in new automotive awards. Net income margin was 5.7% compared with 3.9% in the year-ago quarter. As of Dec 31, 2013, cash and cash equivalents were $518.6 million compared with $515.0 million as of Sep 30, 2013.
Infotainment revenues jumped 28% from the year-ago quarter, or 24% excluding the impact of foreign currency translation to $691 million, primarily due to volume increases in the company’s recently launched platforms. During the quarter, Harman won customer awards worth $725.0 million from the likes of VW Group, Chang’an, Geely, Yamaha, Suzuki, BMW, Jaguar/Land Rover.
Lifestyle revenues were $430 million, an increase of 16% compared to the prior year or 14% excluding the impact of foreign currency translation. Robust sales in Harman’s home and multimedia product lines, and car audio business increased the revenue.
Professional division revenues were $207 million, an increase of 45% compared to the prior year or 46% excluding foreign currency translation, primarily driven by strong performance by Martin Professional and strong demand for audio products. A chart has been provided below to show Harman’s financial performance.
Further, a promising recovery in Europe's automotive industry, Harman's biggest market, helped the company to get more contracts for its new products in the second quarter.
A chart has been provided below to show Harman’s fiscal year 2014 forecast.
Harman’s new manufacturing capacities, growing product pipeline, solid patent portfolio, new awards as well as product launches will help to achieve this forecast.
Harman vs. the Industry
The table provided below shows some important figures of Harman compared to the industry in which it belongs.
Figures are from Yahoo Finance
From the above table, we can see that compared to the industry, the company’s fundamentals are quite strong and this will remain positive in the coming years.
Harman is constantly innovating new products and technology to strengthen its position in this challenging economic environment. On Mar 05, 2014, the company introduced a newly-architected infotainment system to the brand-new Ferrari California. The Connected Media Center (CMC) system combines full-featured infotainment and connectivity in an easy-to-use user environment. Further, Harman is making one of its strongest showings ever at this year’s Geneva Autosalon, demonstrating infotainment and audio solutions in vehicles from an impressive range of manufacturers. Also testifying to the company’s strength as an industry innovator, Harman is showcasing, together with Rinspeed, a new concept car for mobile connectivity within urban spaces.
To strengthen its foothold globally, Harman has entered into a strategic collaboration with Softbank (Japan), Sprint Corporation (NYSE:S), Trikomsel (Indonesia), and Brightstar worldwide on Feb 24, 2014. Under the agreement, partners will exclusively sell the newly designed Harman Kardon® Onyx Studio™ portable Bluetooth wireless speaker to their customers globally.
India at a Glance
Harman International (India) Pvt. Ltd., a wholly owned subsidiary of Harman International Industries Inc, was legally incorporated in 2009 as an R&D centre providing support to the company’s global businesses. The India Development Centre was set up in order to broaden Harman’s engineering footprint for developing audio and infotainment solutions for automotive, professional, and consumer lifestyle markets. Since then, it has evolved into a fully fledged organization, with a strong focus on India, from a market and a Research and Development point of view. Headquartered in Bangalore, the company today has a rapidly growing employee base, a strong distributor and sales network, an evolving service network and a robust clientele in India.
On March 5, 2014, the company announced that Tata Motors’ brand new cars launched in Europe at the Geneva Motor Show2014 will feature a next generation infotainment system designed and built by Harman. This Audio guru is proud to present a made-for-India Infotainment system that takes in-car connectivity to the next level. Further, on March 20, 2014, Harman India announced its online store, www.harmanaudio.in. The online store will host the company’s unmatched portfolio of innovative speakers, headphones, docks, home theatre, and car audio systems from Harman’s flagship brands.
On a Concluding Note
Harman is a solid company for long-term investors and has a strong balance sheet. Over the past few years, Harman is driving long-term profitable growth.
Charts from company website
Harman has an established and already proven plan to reach higher margins over the next several years. The company’s increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, and solid stock price performance will boost top line and profitability over the long term.