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Harris Corp (HRS) Beats Q1 Earnings and Revenue Estimates

Zacks Equity Research

Harris Corporation HRS reported first-quarter fiscal 2017 earnings (on an adjusted basis for the quarter ended Sep 30, 2016) of $1.39 per share that beat the Zacks Consensus Estimate by 4 cents. Quarterly earnings also improved 6.1% on a year-over-year basis.

 

Revenues in the first quarter came in at $1.75 billion. The top line beat the Zacks Consensus Estimate of $1.73 billion but declined 3.3% from the year-ago figure. 

Cost of product sales and services in the reported quarter was $1,175 million compared with $1,220 million in the prior-year quarter. Engineering, selling & administrative expenses totaled $311 million in the quarter under review as against $329 million in the first quarter of fiscal 2016.

Segmental Performance

This was the fifth full quarter at Harris after the Exelis acquisition. Since the first quarter of fiscal 2016, the company has been reporting under four operating units – Communication Systems, Critical Networks, Electronic Systems and Space and Intelligence Systems.

Revenues at the Communication Systems segment came in at $431 million in the quarter, down 5%. Segmental operating income declined significantly to $119 million due to lower volumes and unfavorable mix.

Revenues at the Space and Intelligence Systems unit were $453 million, up 4%. The upside was driven by multiple factors, including higher revenues from intelligence community customers. Operating income for the segment was $80 million, up 17.6%. Results were boosted by a strong program performance as well as higher pension income.

Revenues at the Electronic Systems unit totaled $361 million, down 3%. The top-line expanded 2% on an organic basis. Segmental operating income stood at $74 million, up 7.2%.

Revenues at the Critical Networks unit grossed $527 million, down 7%. Lower revenues at CapRock’s energy market resulted in the decline. Operating income at the segment improved marginally to $66 million.

At the end of the reported quarter, the company had cash and cash equivalents of $284 million compared with $487 million at the end of fiscal 2016. Total long-term debt at the end of fiscal first quarter was $4,087 million compared with $4,120 million at the end of fiscal 2016.

HARRIS CORP Price, Consensus and EPS Surprise

 

HARRIS CORP Price, Consensus and EPS Surprise | HARRIS CORP Quote

CapRock Update

Harris Corporation has inked a deal worth $425 million to sell its CapRock Communications business to SpeedCast International Limited. Harris intends to utilize the proceeds from the deal, expected to close in first quarter of fiscal 2017, to reduce its debt and for shareholder-friendly activities. SpeedCast is a leading satellite communications and network service provider across the globe.

View Maintained

Harris Corporation still expects earnings per share (on an adjusted basis) in fiscal 2017 in the band of $5.70 to $5.90. The Zacks Consensus Estimate for fiscal 2017 currently is $5.73 per share, well within the guidance range. The company still projects fiscal 2017 revenues in the band of $7.11 billion to $7.33 billion. The Zacks Consensus Estimate currently stands at $7.24 billion for fiscal 2017, well within the guidance range.

Zacks Rank & Stocks to Consider

Harris currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include InterDigital Inc. (IDCC), Juniper Networks Inc. (JNPR) and DragonWave Inc. (DRWI). All three stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

InterDigital has a healthy track record with respect to earnings per share. The company outpaced the Zacks Consensus Estimate in three of the last four quarters. 

Juniper Networks also has a healthy track record with respect to earnings per share. It surpassed the Zacks Consensus Estimate in three of the last four quarters. 

DragonWave’s stock price has surged over 32% in the last one month.

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