Harris' Reliance on Government Orders Worry amid Deal Wins
On Sep 30, we issued an updated research report on Harris Corporation (HRS).
On July 29, 2014, Harris reported fourth-quarter fiscal 2014 financial results with both the top and the bottom line surpassing the respective Zacks Consensus Estimate. Improved foreign defense expenditure, a strong tactical radio order pipeline and growth in the Government Communication segment are likely to act as catalysts for the company moving ahead.
More recently, Harris won a major contract from the U.S. Air Force to provide Hosted Payload Solutions (HoPS) through 5 years. The contract is valued at $495 million. This adds yet another feather to Harris’ cap, given that it has clinched a series of vital contracts over the past few days.
Prior to that, on Sep 11, 2014, Harris received a massive order worth $88 million from an unidentified country in the Middle East to supply Falcon III wideband tactical radios and accessories. The company will deliver the RF-7800H wideband HF tactical radio, the RF-7850M radio and the RF-7800S lightweight soldier personal radio. Such regular and valuable contract wins should boost Harris’ top and bottom lines higher in the near term.
However, a major chunk of Harris’ revenues depend largely on government contracts. This can prove to be risky given that the U.S. Department of Defense has decided to reduce its budget by nearly $500 billion over the next decade. In future, any additional Federal budgetary pressures may result in deeper-than-expected cuts in defense spending, which in turn, may significantly impact the company’s business prospects. Furthermore, a shift in the U.S. Government’s foreign policy may also result in the termination of some major international contracts for the company.
Key Picks in the Sector
Other stocks which warrant a look in this sector include Aruba Networks, Inc. (ARUN), General Dynamics Corporation (GD) and The Boeing Company (BA).
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 ARUN
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