Will Harris (HRS) Beat Earnings Again this Season?


Harris Corporation (HRS), a leading supplier of communications equipment and services, is set to report its third-quarter fiscal 2014 quarterly numbers before the opening bell on April 29, 2014.

In the prior quarter, the company’s earnings surpassed the Zacks Consensus Estimate by a margin of 8.55%.  Let’s see how things are shaping up for this announcement.

Factors to Influence This Quarter

In the past couple of months, Harris received multiple global radio orders. Recently, the company received orders worth $82 million from a global customer and signed a contract worth $49 million with an Asian country.

Harris’ RF Communications segment is gaining momentum in international markets and this trend is likely to continue since the company’s next-generation Falcon III tactical radio is gaining market traction. Moreover, the company has raised its earnings outlook for fiscal 2014, mainly attributable to 3% annual growth in international military spending.

On the flip side, Harris largely depends on the U.S. Government contracts for a major part of its revenues. The Defense Department has decided to reduce its budget by nearly $500 billion over the next decade. In the future, any additional federal budgetary pressures may result in deeper-than-expected cuts in defense spending, which may significantly impact the company’s business prospects. Furthermore, a shift in the U.S. Government’s foreign policy may result in the termination of some major international contracts.

Earnings Whispers

Our proven model does not conclusively show that Harris is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Most Accurate estimate and the Zacks Consensus Estimate are poised at $1.19. Hence, the ESP is 0.00%.

Zacks Rank: Harris’ Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

Juniper Networks, Inc. (JNPR) with Earnings ESP of +3.70% and Zacks Rank #2 (Buy).

America Movil S.A.B. de C.V. (AMX) with Earnings ESP of +31.71% and Zacks Rank #3 (Hold).

RigNet, Inc. (RNET) with Earnings ESP of +11.11% and Zacks Rank #3 (Hold).

Read the Full Research Report on HRS
Read the Full Research Report on JNPR
Read the Full Research Report on AMX
Read the Full Research Report on RNET

Zacks Investment Research

View Comments (0)