Harman International (HAR)
A New Earnings Winner
Michael Cintolo , Chief Analyst, Cabot Market Letter and the Cabot Top Ten Trader
February 12, 2015
Originally from Cabot Wealth Advisory
Harman International (HAR) soared 24% on seven times average volume in reaction to earnings on January 29 ... and then surged another 4% on quadruple average volume the day after. It's traded tightly since, holding all of its gains. Here's what I wrote about the company in Cabot Top Ten Trader two weeks ago:
"It might be a little fanciful to ascribe Harman International's recent surge to low gas prices, but there's some truth there. Harman makes top-of-the-line audio gear like speakers, CD players, amps and the like for all kinds of installations. But the auto segment has been the biggest driver of growth, as the company's relationships with BMW, Audi and other high-end marques give it great exposure in the auto biz, and low gas prices are certainly encouraging consumers to shop higher on the food chain than they ordinarily would. Whatever the reason, Harman's fiscal Q2 report last Thursday was across-the-board strong, with revenue up 19% and EPS up 64%, both well above analysts' estimates, and the company's 8% after-tax profit margin was also the highest in years. The company also got support from its home and professional products and services lines, but cars were the big story. Consumers are looking for Internet-connected audio and entertainment options, and Harman does those very well. To complete the picture, Harman also raised its estimates for the remainder of its fiscal year through June-and there's a dividend with a 1.0% annual yield."
With HAR beginning to calm down, I wouldn't be surprised to see a minor shakeout or two going forward, especially if the market has another dip toward the lower end of its trading range. But I think the stock is buyable around here or on dips of a few points, with a 10% loss limit.
Paul Goodwin, Chief Analyst, Cabot China & Emerging Markets Report
January 23, 2014
Originally from Cabot Wealth Advisory
Most of the evidence that equity investors use to decide on which stocks to buy is probabilistic. There are no guarantees. A company that has been growing revenues and earnings quarter after quarter may keep the string going … or may not. And a stock with a low P/E ratio and good growth prospects may be ready to start climbing … or not.
But earnings season, when investors compare companies’ results with the “consensus numbers” (an average of the estimates of all the analysts who are following that company) is generally pretty clear in its verdict. If a company is supposed to make a nickel per share but makes six cents, that’s a beat. Everyone’s happy. If revenue was supposed to top $200 million but the report says $199 million, that’s a miss. Nobody’s happy.
Hitting the consensus numbers generally supports a stock’s price. Exceeding the number often leads to a jump in price, including the “gap up” that investors love to see. A stock that pops higher on the day after earnings (especially if volume has also spiked higher) often gets a dose of momentum that will power it to further gains.
Harman International (HAR) is a maker of audio equipment that’s been making big moves on the strength of its infotainment systems for cars, mobile devices, high-end home systems and every kind of venue up to concert halls and sports stadiums. Harman had great Q2 and Q3 earnings reports, and you can see their effects in the high-volume moves in August and late October. Harman will report results for the latest quarter on January 30, and it’s possible that another analyst-beating performance will kick off another rally. (This report will reflect Harman’s fiscal second quarter of 2014, so no full-year results will appear.) The release will happen before the market opens, and there will be a conference call at 11:00 EST to talk things over.
There are exceptions to all of these rules, of course. If management gives a convincing reason for the miss, or issues positive guidance to future performance, the damage can be contained, or even reversed.
|400 Atlantic Street
Stamford, CT 06901
|Index Membership: N/A
Sector: Consumer Goods
Industry: Electronic Equipment
Full Time Employees: 14,202