Harman Falls After Missing Estimates, Cutting Profit Outlook

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Harman International Industries Inc. tumbled the most in two years after the maker of Harman Kardon and JBL audio equipment posted quarterly profit and sales that trailed analysts’ estimates and cut its full-year earnings forecast.

Profit excluding some items was $1.22 a share on sales of $1.46 billion for the fiscal third quarter ended March 31, the Stamford, Connecticut-based company said in a statement Thursday. That average estimates compiled by Bloomberg were $1.27 and $1.48 billion. Harman also reduced its annual earnings-per-share outlook to $5.65, from $5.85 in January.

The company “delivered another solid quarter of growth, particularly in our automotive businesses, despite unprecedented foreign exchange headwinds,” Chief Executive Officer Dinesh Paliwal said in the statement. “Our professional business was hit harder due to a strong U.S. dollar and a softening in some emerging and European markets.”

The shares slid 7 percent to $130.38 at the close in New York for the biggest daily decline since January 2013 and the fifth-largest drop in the Russell 1000 Index. The stock has gained 22 percent this year, as the Standard & Poor’s 500 Index rose 1.3 percent.

Harman said quarterly sales rose 4.3 percent from a year earlier and would have climbed 14 percent excluding the effects of currency rates. Margins in the company’s professional unit, its smallest, fell to 6.6 percent of sales from 12.4 percent.

The unit, which sells audio systems for concert halls, airports, large churches and sports arenas, gets about 20 percent of revenue from customers in Brazil, Russia, India and China. The strength of the U.S. dollar meant the unit’s prices were sometimes 50 percent higher than those of a Japanese competitor, Paliwal said in an interview. Harman was able to offer some discounts, but not enough to keep pace, he said.

“Our Russian business was decimated and China has gotten worse,” he said in the interview. “We’re taking fixed costs down in that business and will push into countries with more euro-based currencies, but the problem will be with us a few more quarters.”

Two-thirds of the reduction in the profit forecast was because of currency effects, Paliwal said.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers including the euro, yen and pound, has risen 16 percent since June.

(An earlier version of this story was corrected to fix the quarterly sales figures.)

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