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Is Harman (HAR) Well Poised to Beat Q4 Earnings Estimates?


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We expect Harman International Industries, Incorporated (HAR - Analyst Report) to beat expectations when it reports fourth-quarter fiscal 2014 results on Aug 7. In the third quarter, the company posted a positive earnings surprise of 12.0%. Moreover, the company has posted an average positive earnings surprise of 10.2% over the past four quarters.

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Harman is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.82%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): Note that stocks with Zacks Rank #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.  
The combination of Harman’s Zacks Rank #3 and +0.82% ESP makes us very confident of a positive earnings beat.

What is Driving the Better-than-Expected Earnings?

We believe that Harman’s new manufacturing capacities, growing product pipeline, solid patent portfolio, new awards as well as product launches will boost its top line and profitability in the near term.

Moreover, car makers such as BMW, Daimler and VW Group selected Harman’s technology for their car lines. Also, Harman won customer awards from Toyota (TM - Analyst Report) to supply infotainment solutions across its car models in Europe. These will act as major growth divers for Harman.

Additionally, we believe that the partnerships with Softbank, Sprint Corp., Trikomsel and Brightstar will expand Harman’s market share. The acquisitions of Yurbuds and AMX LLC will further expand its product portfolio in the long run.

Other Stocks to Consider

Harman is not the only firm looking up this earnings season. We also see likely earnings beats coming from these three industry peers:

NVIDIA Corp. (NVDA - Analyst Report), with an Earnings ESP of +8.00% and a Zacks Rank #2 (Buy).

NetApp Inc. (NTAP - Analyst Report), with an Earnings ESP of +2.50% and a Zacks Rank #3.