Harris Corporation HRS recently inked an agreement with Elbit Systems Ltd. — a major defense electronics maker — to sell its Night Vision business to Elbit Systems of America, LLC for $350 million in cash. The technology and communications company intends to utilize the sale proceeds to pre-fund the L3 Harris pension and return cash to its shareholders.
Headquartered in Roanoke, VA, the Night Vision business represents a subset of Harris’ Communication Systems operating segment. Notably, the divested business is a leading provider of night vision technology for security forces and federal homeland security. The transaction is, however, subject to the successful completion of Harris’ proposed merger with L3 Technologies, Inc. LLL, including receipt of regulatory approvals.
Remarkably, a day before this deal was announced, Harris and L3 Technologies received their respective stockholders’ approval for all proposals that were required for the completion of the impending merger to create L3 Harris Technologies, Inc. The parties expect the transaction to close in the middle of calendar year 2019, subject to customary closing conditions.
The all-stock-merger-of-equals is aimed at creating a global defense technology leader with the combined firm being the sixth largest defense company in the United States and a top 10 defense company globally. The merged business will likely boast around 48,000 employees with customers in more than 100 countries.
The strategic deal will enable it to increase scale, strengthen core businesses and stoke its competitive position. The long-term growth prospects of Harris appear quite promising with earnings growth expectation of 8%.
Owing to solid second-quarter fiscal 2019 financial results with record earnings and high-single-digit revenue growth driven by margin expansion across all the three segments, Harris raised its guidance for fiscal 2019. It currently expects revenues in the range of $6.66-$6.69 billion, up 8-8.5% from fiscal 2018 (previously expected 6-8% revenue growth). Non-GAAP EPS is projected between $7.90 and $8.00, up from the previous guidance range of $7.80 and $7.90.
Backed by diligent execution of operational strategies alongside multiple contract wins from federal customers, the stock has recorded an average return of 23.3% compared with the industry’s rise of 7.1% in the past three months.
Currently, Harris has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the industry are Juniper Networks, Inc. JNPR and Motorola Solutions, Inc. MSI, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Juniper has long-term earnings growth expectation of 7.1%.
Motorola has long-term earnings growth expectation of 8%.
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