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Northcoast Research Rated Harman International as a ‘Buy’

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Price movement

Harman International Industries (HAR) has a market cap of $5.5 billion. It fell by 0.76% to close at $74.84 per share on June 14, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -7.3%, 2.6%, and -19.8%, respectively, on the same day. This means that HAR is trading 2.7% below its 20-day moving average, 5.1% below its 50-day moving average, and 14.8% below its 200-day moving average.

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Related ETFs and peers

The Guggenheim Raymond James SB-1 Equity ETF (RYJ) invests 0.71% of its holdings in HAR. The ETF tracks an equal-weighted index of US-listed stocks expected by analysts to achieve 15% total return and outperform S&P 500 over the next 6 to 12 months. The YTD price movement of RYJ was 0.92% on June 14, 2016.

The iShares Morningstar Mid-Cap Growth Index Fund (JKH) invests 0.50% of its holdings in HAR. The ETF tracks a market-cap-weighted index of mid-cap companies selected by Morningstar based on their growth characteristics.

The market caps of HAR’s competitors are as follows:

  • Delphi Automotive (DLPH): $18.2 billion
  • Lear Corporation (LEA): $8.5 billion

Harman’s rating

Northcoast Research has initiated the coverage of Harman International with a “buy” rating and set the stock price target at $105.0 per share.

On June 10, 2016, Piper Jaffray initiated the coverage of Harman International with a “neutral” rating and set the stock price target at $84.0 per share.

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Performance of Harman International in fiscal 3Q16

Harman International (HAR) reported fiscal 3Q16 net sales of $1.6 billion, a rise of 11.2% compared to net sales of $1.5 billion in fiscal 3Q15. Sales of the Connected Car, Lifestyle Audio, and Connected Services segments rose by 5.1%, 11.6%, and 147.8%, respectively.

Sales of the Professional Solutions segment fell by 4.1% in fiscal 3Q16 compared to fiscal 3Q15. The company reported net foreign exchange of -$3.6 million in fiscal 3Q16 compared to $3.4 million in fiscal 3Q15.

HAR’s net income and EPS (earnings per share) rose to $88.8 million and $1.22, respectively, in fiscal 3Q16, compared to $70.3 million and $0.99, respectively, in fiscal 3Q15.

Harman’s cash and cash equivalents fell by 44.5%, and its inventories rose by 21.1% in fiscal 3Q16 compared to fiscal 4Q15. Its current ratio rose to 1.7x and its debt-to-equity ratio fell to 1.3x in fiscal 3Q16, compared to a current ratio and a debt-to-equity ratio of 1.4x and 1.5x, respectively, in fiscal 4Q15.

Projections

Harman International Industries (HAR) has updated its projections for fiscal 2016:

  • revenue of ~$6.8 billion
  • operational EPS of ~$6.20

The reduction in the company’s revenue and EPS is due to the weakness in the Professional Solutions division and supply constraints as a result of the earthquakes in Japan.

Next, we’ll take a look at Reynolds American.

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