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What's in Store for L3Harris Technologies' (LHX) Q4 Earnings?

Zacks Equity Research

L3Harris Technologies Inc. LHX is set to release fourth-quarter fiscal 2019 results on Jul 31, before market open.
 
In the last reported quarter, the company delivered a positive earnings surprise of 3.43%. Moreover, L3Harris came up with average trailing four-quarter beat of 2.98%.

Let’s see how things are shaping up prior to this announcement.

Q4 Expectations Post Merger
 
On Jul 1, 2019, L3 Technologies completed its merger with Harris Corp and together they formed a combined entity — L3Harris Technologies. Currently, the Zacks Consensus Estimate for the new company’s earnings is pegged at $2.52 on revenues of $1.8 billion, indicating 29.2% and 8.3% growth from the respective figures reported in the year-ago quarter.

Notably, these expectations are driven by legacy growth trends of Harris Corp and partial integration synergies as a result of L3 Technologies’ addition to the new organization. 

L3Harris Technologies Inc Price and EPS Surprise

L3Harris Technologies Inc Price and EPS Surprise

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

Factors Driving Harris Corp’s Results

Regular order growth from the Pentagon and its foreign allies has been a key catalyst for Harris Corp’s top and bottom line. We expect the soon-to-be-reported quarter’s result to reflect similar growth trends.

Moreover, the company won a few notable orders like a $212 million modification contract to supply electronic jammers, a $243 million contract to provide fully digital navigation signals for the first two GPS III Follow-On (GPS IIIF) satellites and a $284 million deal to support Geostationary Operational Environmental Satellite (GOES). Such contract wins are expected to boost the company’s backlog in the fourth quarter of fiscal 2019.

Harris Corp also witnessed robust free cash flow growth for the first three quarters of fiscal 2019. Similar growth trends in the fiscal fourth quarter must have enabled L3Harris to increase the combined company’s dividend growth by 10%, which its shareholders will start receiving from the quarter ending September 2019. Therefore, we may expect solid free cash flow to get duly reflected in the soon-to-be-reported quarter’s results.

L3 Technologies’ Performance

L3 Technologies suffered from lack of big contracts during the second quarter (ending Jun 30, 2019). This, in turn, might hurt its quarterly backlog figures.

Nevertheless, solid order flow has been a major revenue growth driver for the entity and can be expected to continue in the quarter to be reported. Moreover, improved program performance and productivity savings should boost operating margin, which in turn can be expected to bolster its bottom-line performance.

Earnings Whispers
 
Our proven model does not show that L3Harris Technologies is likely to beat on earnings in fourth-quarter fiscal 2019. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Earnings ESP: L3Harris Technologies has an Earnings ESP of 0.00%.
 
Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
 

Recent Defense Releases

Textron Inc. TXT reported second-quarter 2019 earnings from continuing operations of 93 cents per share, which surpassed the Zacks Consensus Estimate of 85 cents by 9.4%. The bottom line also increased 6.9% from 87 cents registered in the year-ago quarter.

Lockheed Martin Corp. LMT reported second-quarter 2019 earnings of $5 per share, which outpaced the Zacks Consensus Estimate of $4.74 by 5.5%. The bottom line also improved 23.5% from $4.05 in the year-ago quarter.

Northrop Grumman Corporation NOC reported second-quarter 2019 earnings of $5.06 per share, which exceeded the Zacks Consensus Estimate of $4.64 by 9%. The bottom line also increased 12% from $4.50 reported in the year-ago quarter.

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L3Harris Technologies Inc (LHX) : Free Stock Analysis Report
 
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