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L3Harris Technologies (LHX) Q3 Earnings Top, EPS View Up

Zacks Equity Research

L3Harris Technologies, Inc.’s LHX adjusted earnings from continuing operations in third-quarter 2019 came in at $2.58 per share, which surpassed the Zacks Consensus Estimate of $2.39 by 7.9%. The bottom line also increased 26.5% from the year-ago quarter’s figure of $2.04.

Excluding one-time items, the company reported GAAP earnings of $1.90 compared with $1.78 registered in the year-ago quarter.

The year-over-year uptick can be attributed to higher volume from the L3Harris merger, strong operational performance, integration savings and the gain on the sale of the Harris Night Vision business.

Total Revenues

In the quarter under review, the company’s revenues came in at $4.43 billion, falling short of the Zacks Consensus Estimate of $4.45 billion by 0.5%.

L3Harris Technologies Inc Price, Consensus and EPS Surprise

L3Harris Technologies Inc Price, Consensus and EPS Surprise

L3Harris Technologies Inc price-consensus-eps-surprise-chart | L3Harris Technologies Inc Quote

Backlog

Backlog in the reported quarter totaled $16.5 billion, reflecting 10% rise from the year-ago quarter.

Segmental Performance

Integrated Mission Systems: Net sales at the segment improved 10% to $1,303 million from the prior-year quarter’s $1,186 million driven by strength in ISR missionization on the Compass Call Cross Deck program and special mission aircraft for the U.S. government. Also increased demand for Wescam turret systems boosted this segment’s top line.

Operating income came in at $180 million compared with $145 million in the year-ago quarter. Moreover, operating margin expanded 160 basis points (bps) to 13.8%.

Space and Airborne Systems: The segment recorded net sales of $1,162 million in the third quarter, up 20% year over year. The upside can be attributed to double-digit growth in each of this segment’s businesses, Electronic Warfare (EW), Avionics, Space, and Intel and Cyber.

Operating income increased to $226 million from $164 million in the year-ago quarter. Operating margin expanded 250 bps to 19.4%.

Communication Systems: Net sales at the segment rose 11% to $1,032 million on account of strong growth in Tactical Communications, Integrated Vision Systems and Public Safety businesses.

Operating income increased to $234 million from $199 million. Operating margin contracted 140 bps to 22.7%.

Aviation Systems: Net sales at the segment slipped 0.5% to $948 million on account of a decline in Commercial Training Solutions and competitive loss of the USAF C-17 contract.

Operating income increased to $127 million from $96 million. Operating margin contracted 330 bps to 13.4%.

Financial Position

As of Sep 30, 2019, L3Harris had $1,001 million in cash and cash equivalents compared with $343 million as of Dec 28, 2018.

Long-term debt as of Sep 30, 2019 was $6,307 million compared with $3,411 million as of Dec 28, 2018.

Net cash flow from operating activities amounted to $81 million at the end of the third quarter compared with the year-ago cash flow of $117 million.

In the reported, L3Harris returned $922 million to shareholders through $750 million in share repurchases and $172 million in dividends.

2019 View

L3Harris updated its financial guidance for 2019.  The company expects to generate revenues of $18.1 billion compared with the earlier guided range of $18.0-$18.1 billion. The current Zacks Consensus Estimate for the company’s full-year revenues, pegged at $18.06 billion, lies above the company guided figure.

The company increased its projection for 2019 adjusted earnings to $10 per share from the previously guided range of $9.60-$9.70 per share. The current Zacks Consensus Estimate for the company’s full-year earnings, pegged at $9.67 billion, lies much below the company guided figure.

Additionally, L3Harris now expects net cash from operating activities to be $1.95 billion compared with the prior guidance of $2.26-$2.31 billion.

Moreover, it expects to generate adjusted free cash flow of $2.35 billion compared with the previous range of $2.30-$2.35 billion.

Zacks Rank

L3Harris currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Hexcel HXL reported third-quarter 2019 earnings of 90 cents per share, which surpassed the Zacks Consensus Estimate of 89 cents by 1.1%. The bottom line also improved 12.5% from the prior-year quarter’s 80 cents.

Lockheed Martin LMT reported third-quarter 2019 earnings of $5.66 per share, which surpassed the Zacks Consensus Estimate of $5.03 by 12.5%. The bottom line also improved 10.1% from $5.14 registered in the year-ago quarter.

Textron TXT reported third-quarter 2019 earnings from continuing operations of 95 cents per share, which surpassed the Zacks Consensus Estimate of 85 cents by 11.8%. The bottom line increased 55.7% from the year-ago quarter.

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