Harris Meets Earnings Est.

Zacks

Harris Corp. (HRS) reported mixed financial results for the third quarter of fiscal 2013. GAAP net income from continuing operations was $124.6 million or $1.12 per share compared with a net income of $154.4 million or $1.38 per share in the year-ago quarter. Quarterly earnings per share of $1.12 were in line with the Zacks Consensus Estimate.

However, consolidated revenues in the reported quarter stood at $1,203.7 million, down 12.1% year over year, missing the Zacks Consensus Estimate of $1,209 million. Harris currently carries a Zacks Rank #4 (Sell).

Cost of sales in the reported quarter was $803.5 million against $879.8 million in the prior-year quarter. Gross margin was 33.2% compared with 35.7% in the prior-year quarter. Engineering, selling & administrative expenses were $202.5 million versus $242 million in the year-ago quarter. Quarterly operating margin was 16.4% compared with 18% in the year-ago quarter. The third quarter saw total new orders of $1.13 billion against $1.48 billion in the prior-year quarter.

In the first nine months of fiscal 2013, Harris generated $513.2 million in cash from operations compared with $483.2 million in the prior-year period. Free cash flow (cash flow from operations excluding capital expenditures) for the reported period was $388.3 million compared with $325.8 million in the year-ago period.

At the end of the reported quarter, Harris had cash and cash equivalents of $459 million compared with $356 million at the end of fiscal 2012. Total debt at the end of the third quarter was $1,576.1 million compared with $1,883.0 million at the end of fiscal 2012. The debt-to-capitalization ratio was 0.48 compared with 0.49 at the end of fiscal 2012.

Government Communications System Segment

Quarterly revenues for the segment fell 6% year over year to $442.4 million. Operating income in the quarter was $67.1 million versus $64.1 million in the prior-year quarter. Quarterly operating margin was 15.2%, remaining same year over year.

RF Communications Segment

Revenues in the quarter were $417.7 million, down 22.3% year over year. “Tactical Radio Communications” and “Public Safety and Professional Communications” contributed roughly 66% and 34%, respectively. Operating income was $116.1 million compared with $181.6 million in the year-ago quarter. Quarterly operating margin was 27.8% against 33.8% in the year-ago quarter.

In the reported quarter, the segment generated new orders worth $486 million, $297 million from the Tactical Radio Communications business and $189 million from the Public Safety and Professional Communications business. Total order backlog in the Tactical Radio Communications segment was $582 million and $619 million in Public Safety and Professional Communications.

Integrated Network Solutions

The segment generated revenues of $364.5 million, down 6.1% year over year. Operating income in the quarter was $30.3 million compared with $22.3 million in the year-ago quarter. Quarterly operating margin was 8.3% compared with 5.7% in the prior-year quarter.

Financial Outlook

For fiscal 2013, Harris expects earnings per share from continuing operations of $4.60-$4.70 compared with the prior guidance of $5.00-$5.20 while on a GAAP basis earnings per share from continuing operations are expected to be $3.95-$4.33.

Other Stocks to Consider

Other stocks to consider in the defense sector and public safety are General Dynamics Corp. (GD), The Boeing Co. (BA) and Motorola Solutions Inc. (MSI). Both General Dynamics and Boeing surpassed the Zacks Consensus Estimate in the most recent quarter but the net earnings of Motorola Solutions missed the Zacks Consensus Estimate.

Read the Full Research Report on BA

Read the Full Research Report on GD

Read the Full Research Report on HRS

Read the Full Research Report on MSI

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