Harman Unveils New JBL Speakers - Analyst Blog

A developer of audio products and electronic systems, Harman International Industries Inc. (HAR) recently launched its new JBL Cinema 300 and Cinema 500 speaker systems.

JBL Cinema 300 and 500 are 5.1 home theatre systems ideal for watching movies at home. JBL Cinema 300 and Cinema 500 are available for $499 and $699, respectively.

The systems feature JBL Weave aesthetic styling and two PolyPlas cones in the center channel. The four identical satellites are voice matched with the center, creating a theatre-like ambience in the room.

The 500 series features an additional dual 3-inch (75mm) PolyPlas cone, which enhances the movie watching experience.

The Cinema series possesses a 150-watt powered subwoofer along with a fast-moving 8-inch (200mm) woofer that improves sound clarity by pushing sound waves down to the floor, compared to traditional systems that allow it to hit the walls.

Harman's JBL brand has a strong consumer base spanning consumer, automobile and professional markets. Most recently, Harman launched JBL OnBeat docking stations for Apple Inc.'s (AAPL) iPad and iPhone.

We believe the launch of the new JBL Cinema series will likely drive sales growth in the consumer division going forward.

The company achieved strong sales growth in the second quarter of 2011, with revenues of $956.1 million, up 3.0% year over year. The strong year-over-year growth was driven by increased penetration in the Asian and Latin American markets, further supported by the Selenium acquisition in Brazil, which was completed in the latter half of 2010.

Sales from the Consumer division grew 10.0% year over year (16.0% excluding foreign currency effects) to $139.0 million in the second quarter. The Consumer division grew 4x in the emerging markets of Brazil, India and China compared with the prior-year quarter.

The Consumer division in China was helped by a new partnership with China's leading consumer electronics distributor, Digital China during the quarter.

Harman also won several important contracts from Toyota Motor Corp. (TM), Chrysler and Fiat that increased its backlog to $13.0 billion at the end of the second quarter.

Recommendation

We maintain a Neutral rating on a long-term basis (6-12 months). We believe that strong growth from emerging markets, particularly Brazil, India and China will drive top-line growth going forward.

Harman continues to face tough competition from Bose Corp., Boston Acoustics Inc., Pioneer Corp., Yamaha Corp., Rockford Corp. (ROFO), Panasonic Corp. (PC) and Sony Corp. (SNE), which may hurt its profitability going forward.

Currently, Harman has a Zacks #3 Rank, which implies a Hold rating on a short-term basis (1-3 months).