Aggressive · Stocks to Consider and Updates

Harris Delivers Strong Profits; Outlook Raised

Melbourne, Florida’s Harris Corp. (NYSE: HRS – $151.51) reported strong fiscal third quarter results with sales and orders growth. Total revenue for the period was $1.57 billion, up 5% compared with the prior year, with growth across all three segments led by Electronic Systems and Communication Systems. Earnings per share grew double digits to $1.67 from higher volume, strong operational performance, higher pension income, a lower share count and the benefit of tax reform. This compares to $1.38 in the prior year and four cents ahead of Street estimates. Revenue in the Communications Systems business increased 4% in the third quarter from growth in tactical communications and night vision products. The Electronic Systems segment increased revenue 10% from higher volume in avionics, with growth on F-35 and other international platforms; growth in electronic warfare on F-16 and F/A-18 platforms; and in C4ISR from the ramp of U.K. robotics and the UAE battle management system. Third quarter Space and Intelligent Systems revenue increased 1% with growth, driven by the ramp up of small satellites, ground-based processing adjacency and space surveillance programs.

       As a result of strong year-to-date performance, Harris updated its guidance for fiscal 2018 to the following:

  • Revenue of about $6.14 billion, up 4% from fiscal 2017 (tightened from previous guidance of $6.08 – 6.14 billion)
  • Adjusted earnings per share from continuing operations of $6.45-$6.50 (tightened from previous guidance of and $6.30 – $6.50)
  • Adjusted free cash flow of $900 – $925 million (increased from previous guidance of approximately $900 million)
  • Tax rate of about 22.5% 

       Shares of Harris, yielding 1.5%, have pulled back of late along with the defense sector and present a decent entry point for long-term aggressive accounts.

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