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Harris Posts Strong Results; Lowers Guidance

HRS  Melbourne, Florida-based Harris Corp. (NYSE: HRS – $74.74) maker of military radios and air-traffic control equipment, lowered its revenue forecast for the year ending in June to $7.5 billion from its earlier guidance for $7.6 billion to $7.68 billion. Harris also said it now expects adjusted earnings to come in about $5.70 a share, curbing its previous prediction for up to $ 5.80 a share. The company cited lower tactical revenue from the Middle East, but that the company’s overall book-to-bill ratio was above 1 on gains in the space/ intelligence and electronics systems segments as well critical networks. The company’s critical networks segment had been hit by the slowdown in energy markets that has reduced demand from oil and gas companies. The company has been transferring some available spectrum to alternative markets such as cruise line operators, where demand for Internet services is soaring. Revenue there grew 45% in the quarter. Revenue in the communications business grew 5.9%; sales in its space and intelligence systems unit more than doubled; and revenue in its electronic systems unit more than tripled. For its third quarter ended April 1, Harris reported an adjusted profit of $1.45 a share, topping analyst expectations for $1.39. Revenue in the quarter, helped by the Exelis acquisition surged 61% to $1.91 billion from a year prior, but fell just short of analyst expectations for $1.92 billion.

      Despite uncertainty, demand in the military portion of the business remains healthy at present. During the most recent quarterly period, the company secured several defense contracts from military arms both at home and abroad, including the U.S. Navy and the Philippines Army. Harris’ dividend yield of 2.6% is above average and appreciation potential to late decade looks worthwhile. The shares fell on the outlook news, but long-term investors can hold onto the shares in a well-diversified aggressive account.


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