UPDATE 2-Car audio maker Harman raises forecast on strong Europe demand

Thu May 1, 2014 11:21am EDT

* Raises 2014 adj earnings forecast to $4.36/share from $4.16

* Third-quarter adj earnings $1.12/share vs est $1.00

* Revenue $1.40 bln vs est $1.27 bln (Adds CEO comments, updates share movement)

By Sruthi Ramakrishnan

May 1 (Reuters) - Harman International Industries Inc raised its full-year forecast for the second time on strong demand for its audio and navigation systems from European luxury carmakers.

Harman shares rose as much as 5 percent in morning trading, but later fell 2 percent.

The company, whose brands include JBL and Harman Kardon, said it now expects adjusted earnings of about $4.36 per share on revenue of about $5.28 billion for the year ending June.

It had raised its adjusted earnings forecast in January to about $4.16 per share on revenue of about $5.1 billion.

Harman won a $100 million deal with Japan's No. 3 mobile carrier Softbank Corp in February to provide Bluetooth wireless speakers, Chief Executive Dinesh Paliwal told Reuters.

The company is also trying to win orders from mid-level carmakers in China, the world's largest auto market where Harman's sales grew 60 percent in the quarter, Paliwal said.

"All the orders we've received in China have come from that (mid-level) platform," he said, naming Geely Automobile Holdings Ltd, Great Wall Motor Co Ltd and Chang'An among its Chinese customers.

The company expected demand to stabilize in Europe, Paliwal said in a statement on Thursday.

Harman got 34 percent of its revenue from German carmakers, such as BMW AG and Volkswagen AG, in the year ended June 2013. Rest of Europe brought in another 19 percent.

Recovering demand from Europe and growing demand for luxury cars in China helped most luxury carmakers register record deliveries and strong results for the first quarter.

Record sales of luxury Audis and Porsches boosted Volkswagen's first-quarter operating profit by 22 percent, while BMW posted a new high in vehicle deliveries in the quarter, helped by increased demand across all regions for its sports utility vehicles.

Sales in Harman's Infotainment business, which provides integrated navigation, entertainment and communication systems to carmakers, rose 29 percent to $736 million in the third quarter ended March 31.

The business is the company's biggest revenue generator.

Total revenue rose 32 percent $1.40 billion.

Net income jumped to $73.4 million, or $1.05 per share, in the quarter ended March 31, from $34.9 million, or 50 cents per share.

The company which is providing audio systems for the upcoming Disney theme park in China, earned $1.12 per share excluding items.

Analysts on average had expected earnings of $1.00 per share on revenue of $1.27 billion, according to Thomson Reuters I/B/E/S.

Harman shares jumped to their six-year high of $115 in early morning trading on the New York Stock Exchange on Thursday before changing course. It was down nearly 2 percent at $107.72 in late morning trading. (Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Maju Samuel and Joyjeet Das)

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