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L3Harris Technologies (LHX) Q4 Earnings Top Estimates, Up Y/Y

Zacks Equity Research

L3Harris Technologies, Inc. LHX reported fourth-quarter fiscal 2019 results for Harris Corporation on a standalone basis, following the completion of L3 Technologies and Harris Corp’s merger on Jun 29.

L3Harris’ adjusted earnings from continuing operations came in at $2.44 per share, which surpassed the Zacks Consensus Estimate of $2.30 by 6.1%. The bottom line also increased 39% from the year-ago quarter’s figure of $1.76.

Excluding one-time items, the company reported GAAP earnings of $2.21 compared with $1.72 registered in the year-ago quarter.

For fiscal 2019, L3Harris’ adjusted earnings of $8.29 per share increased 30% from $6.39 in the prior year. The reported figure also surpassed the Zacks Consensus Estimate of $8.15 by 1.7%.

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

Total Revenues

In the quarter under review, total revenues came in at $1.87 billion, outpacing the Zacks Consensus Estimate of $1.80 billion by 3.4%. The top line also improved 12% year over year. The year-over-year upside was driven by steady growth across all its three segments.

For fiscal 2019, total revenues increased 10% year over year to $6.80 billion. The top line also surpassed the Zacks Consensus Estimate of $6.74 billion by a mere 0.9%.

Orders & Margin

Orders in the fourth quarter totaled $1.90 billion, reflecting a 2% rise from the year-ago quarter.

Operating income came in at $293 million compared with $272 million in fiscal 2018’s fourth quarter. However, operating margin contracted 70 basis points (bps) to 15.7% in the reported quarter.

Segmental Performance

Electronic Systems: Net sales at the segment improved 14% to $728 million from the prior-year quarter’s $636 million driven by sustained growth on long-term platforms – F-35, F/A-18 and F-16.

Operating income summed $144 million compared with $118 million in the year-ago quarter. Moreover, operating margin expanded 120 bps to 19.8%.

Space and Intelligence Systems: The segment recorded net sales of $542 million in the fiscal fourth quarter, up 8% year over year. The upside can be attributed to double-digit growth from classified programs.

Operating income increased to $94 million from $81 million in the year-ago quarter, whereas operating margin expanded 120 bps to 17.3%.

Communication Systems: Net sales at the segment rose 14% to $600 million on account of double-digit growth in all three businesses of this segment.

Operating income increased 11% to $180 million, whereas operating margin contracted 70 bps to 30%.

Financial Position

As of Jun 28, 2019, L3Harris had $311 million in cash and cash equivalents compared with $521 million as of Jun 29, 2018.

Long-term debt as of Jun 28, 2019, was $2,763 million compared with $3,408 million as of Jun 29, 2018.

Net cash flow from operating activities amounted to $1,185 million at the end of fiscal 2019 compared with the year-ago cash flow of $751 million. Capital expenditures totaled $161 million compared with the year-ago figure of $136 million.

In fiscal 2019, Harris generated $1,055 million in adjusted free cash flow, up 15% year over year, and returned $525 million to its shareholders through dividends and share repurchases.

2019 View

L3Harris issued guidance for the calendar year 2019.  The combined company expects to generate revenues in a range of $18.0-$18.1 billion, up 9.5-10.5% from calendar year 2018. The company also anticipates adjusted earnings in the range of $9.60-$9.70 per share.

Additionally, L3Harris expects net cash from operating activities to be in the $2.26-$2.31 billion band, while expectation for free cash flow stands at $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.

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