Will Higher Input Cost Hurt L3Harris (LHX) in Q3 Earnings?
L3Harris Technologies, Inc. LHX is slated to report third-quarter 2023 results on Oct 26, after market close.
L3Harris has a four-quarter average negative earnings surprise of 0.67%. The strong top-line performance across most of the company’s business segments is likely to have contributed to its overall third-quarter revenues. However, increased interest expenses might have dented the bottom line.
Will the Integrated Mission Systems Unit Show Growth?
Strong demand from domestic Intelligence, Surveillance and Reconnaissance (ISR) solutions, driven by growth in domestic aircraft procurement and missionization, is likely to have boosted Integrated Mission Systems (IMS) segment’s revenues in the third quarter. Higher sales volume from the commercial aviation business is also expected to have favored the unit’s quarterly top line.
L3Harris Technologies Inc Price and EPS Surprise
L3Harris Technologies Inc price-eps-surprise | L3Harris Technologies Inc Quote
However, operational challenges within the ISR and Maritime businesses might have had adversely impacted the IMS segment’s overall revenue performance.
The Zacks Consensus Estimate for IMS’ third-quarter revenues is currently pegged at $1,653 million, indicating a decline of 3.3% from the year-ago quarter’s reported figure.
Other Units to Boost Revenues
Higher revenues from the Space Systems business, owing to new production ramp-ups, are likely to have added an impetus to this unit’s revenues.
The Zacks Consensus Estimate for Space and Airborne Systems’ revenues is pegged at $1,688 million, indicating an improvement of 12.3% from the year-ago quarter’s reported number.
Higher sales volume driven by improved electronic component availability, as well as positive synergies from the acquisition of Tactical Data Links, is expected to have boosted Communication Systems’ top-line performance.
The Zacks Consensus Estimate for this unit’s revenues is pinned at $1,240 million, implying growth of 16% from the prior-year quarter’s reported figure.
Third-Quarter Estimates
With the Space and Airborne Systems and the Communication Systems accounting for almost 76% of LHX’s total revenues, solid top-line performance from these segments might have outweighed the sales decline of the IMS unit. This, in turn, is likely to have boosted the company’s overall revenues in the quarter to be reported.
Solid sales growth expectations might have benefited LHX’s bottom-line performance. Moreover, increasing commercial product deliveries, operational improvements and cost controls are likely to have benefited the company’s earnings. However, inflation-induced higher input costs and inflated interest expenses caused by increased interest rates might have had an adverse impact on LHX’s bottom line.
The Zacks Consensus Estimate for third-quarter sales is pegged at $4.83 billion, indicating growth of 13.7% from the prior-year quarter’s reported figure.
The consensus estimate for third-quarter earnings is pinned at $3.07 per share, implying a year-over-year decrease of 5.8%.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for L3Harris Technologies this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.
L3Harris Technologies has an Earnings ESP of +0.86% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks to Consider
Below are three other defense stocks that have the right combination of elements to post an earnings beat this reporting cycle.
General Dynamics GD is expected to release third-quarter results on Oct 25. GD has an Earnings ESP of +0.61% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
General Dynamics delivered a four-quarter average earnings surprise of 2.99%. The consensus estimate for earnings is pegged at $2.87 per share, while that for sales is pinned at $9.94 billion.
RTX Corporation RTX is scheduled to release third-quarter results on Oct 24. RTX has an Earnings ESP of +1.65% and a Zacks Rank #3 at present.
RTX delivered a four-quarter average earnings surprise of 7.90%. The Zacks Consensus Estimate for RTX’s earnings is pegged at $1.19 per share, while that for sales is pinned at $18.71 billion.
Northrop Grumman NOC is expected to report third-quarter results on Oct 26. NOC has an Earnings ESP of +0.67% and a Zacks Rank #3 at present.
NOC delivered a four-quarter average earnings surprise of 4.38%. The consensus mark for earnings is pegged at $5.77 per share, while that for sales is pinned at $9.67 billion.
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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
General Dynamics Corporation (GD) : Free Stock Analysis Report
L3Harris Technologies Inc (LHX) : Free Stock Analysis Report
RTX Corporation (RTX) : Free Stock Analysis Report
