Harris Delivers Solid Earnings; Reiterates Guidance

Shares of communications and technology provider Harris Corp. (NYSE: HRS – $137.69) are trading at an all-time high after reporting fiscal 2018 first quarter revenue of $1.41 billion, even with the prior year and a bit below analysts’ consensus. Adjusted earnings per share increased to $1.38 from $1.28 last year and four cents higher than Street views. Operating margin expanded to 19.2% from 17.3%. The peaked revenues were largely due to growth in Space and Intelligence Systems and Electronic Systems that were offset by lower volume in Communication Systems. Adjusted operating income grew 3%, thanks to strong execution and program performance across all three business segments and higher pension income, partially offset by a $14 million unfavorable impact from the ADS-B program transition from build-out to sustainment. The 8% per share increase was driven by higher operating income and lower share count, partly offset by a less favorable tax rate. A strong 33% increase in orders resulted in a book-to-bill ratio of 1.6, which augurs well for the future. The company reiterated its fiscal 2018 guidance in a range of $5.85-$6.05 per share on revenue of $6.02 billion-$6.14 billion.

       Shares of HRS have gained nearly 52% over the past year and continued moderate growth in sales and earnings should propel the stock higher through late decade. The dividend has increased over the past fifteen years and has grown 19.5% annually over the past ten years, with a current yield of 1.7%. The shares can continue to be held.

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