Harman Reports Sluggish 3Q - Analyst Blog
02 Novembre 2012 - 5:03PM
Zacks
A developer of audio products and electronic systems,
Harman International Industries Inc. (HAR)
reported third quarter 2012 earnings of 79 cents per share, in line
with the Zacks Consensus Estimate. Earnings jumped 14.5% year over
year from 69 cents.
Quarter Details
Revenues decreased 5.0% year over year to $998.2 million in the
third quarter of 2012, and was also short of the Zacks Consensus
Estimate of $1.09 billion. The sluggish year-over-year growth was
primarily attributed to weak performance across all the operating
segments.
Infotainment revenue decreased 7.0% year over year to $561.0
million. Both the Lifestyle division and Professional division
revenue declined 2.7% year over year to $292.0 million and $144.0
million, respectively.
Sales in BRIC (Brazil, Russia, India and China) increased 23.0%
year over year, primarily attributable to a 27.0% upside in revenue
from China.
Gross profit decreased 3.8% year over year to $278.3 million,
primarily due to declining revenue. However, gross margin expanded
40 basis points (“bps”) to 27.9% in the reported quarter.
Segment wise, Infotainment division gross profit declined 11.1%
year over year while Lifestyle division gross profit climbed 5.6%
from the prior-year quarter. Professional revenue remained flat on
a year over year basis in the reported quarter.
Selling, general and administrative (SG&A) expense decreased
6.7% year over year to $199.0 million in the third quarter.
However, SG&A, as a percentage of revenue declined 40 bps to
19.9% in the reported quarter driven by productivity improvement
across the company’s cost base.
Operating income was up 4.1% year over year to $79.3 million.
Operating margin expanded 60 bps to 7.9% based on lower SG&A
expense.
Net income was $54.7 million, up 9.8% from $49.8 million in the
prior-year quarter.
As of September 30, 2012, cash and cash equivalents were $698.6
million compared with $820.4 million as of June 30, 2012. Liquidity
was $1.2 billion, including a $541.0 million credit facility.
Recommendation
We believe that Harman’s expanding new manufacturing capacities;
growing product pipeline, solid patent portfolio, new awards as
well as launch of new products are expected to boost top-line and
profitability over the long term.
However, Harman continues to face tough competition from
Rockford Corp. (ROFO), Panasonic
Corp. (PC) and Sony Corp. (SNE), which
may hurt its profitability going forward. We expect the stock to
remain range bound due to the sluggish macroeconomic environment in
the near term.
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
(ROFO): ETF Research Reports
SONY CORP ADR (SNE): Free Stock Analysis Report
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