Harris Corp.
(
HRS
) declared third quarter 2012 financial results, with both EPS and
revenue surpassing the Zacks Consensus Estimates.
Reported GAAP net loss in the quarter was $256.3 million or
$2.27 per share compared with $139.5 million or $1.12 per share in
the year-ago quarter. The company's decision of divesting its
Broadcast Communications assets in the quarter adversely affected
results. Quarterly adjusted (excluding acquisition related cost)
earnings per share (
EPS
) of $1.35 surpassed the Zacks Consensus Estimate by a penny.
Consolidated revenue in the reported quarter stood at $1,476
million, up 4.47% year over year and was also above the Zacks
Consensus Estimate of $1,474 million.
Cost of sales in the third quarter was $937.9 million compared
with $896.6 million in the prior-year quarter. Engineering,
selling, & administrative expenses were $297.6 million versus
$281 million in the year-ago quarter.
At the end of the third quarter of fiscal 2012, Harris generated
$483.2 million in cash from operations compared with $556.8 million
in the prior-year quarter. Free cash flow (cash flow from
operations excluding capital expenditures) for the period was
$325.8 million compared with $370.7 million in the year-ago
quarter.
At the end of the reported quarter, Harris had cash & cash
equivalents of $299 million compared with $366.9 million at the end
of fiscal 2011. Total debt at the end of the third quarter was
$1,883.2 million compared with $1,887.2 million at the end of
fiscal 2011. Debt-to-capitalization ratio was 0.49 compared with
0.43 at the end of 2011.
Government Communications System Segment
Quarterly revenue from the segment spiked 9.1% year over year to
$470.5 million. Operating income in the quarter was $64.1 million
compared with $59.8 million in the prior-year quarter. Quarterly
operating margin was 13.6% compared with 13.9% in the year-ago
quarter.
RF Communications Segment
Revenue in the quarter was $537.7 million, down 2.2% year over
year. "Tactical Radio Communications" and "Public Safety and
Professional Communications" contributed roughly 85% and 15%,
respectively. Operating income was $181.6 million compared with
$178.5 million in the year-ago quarter. Quarterly operating margin
was 33.8% compared with 32.5% in the year-ago quarter.
In the reported quarter, the segment generated new orders worth
$629 million with $534 million in the Tactical Radio Communications
business and $95 million in the Public Safety and Professional
Communications business. Total order backlog in the Tactical Radio
Communications segment was $717 million and $635 million in Public
Safety and Professional Communications.
Integrated Network Solutions
The segment generated revenues of $499.6 million, up 8% year
over year. Operating loss in the quarter was $406 million compared
with an operating income of $24.5 million in the year-ago
quarter.
Financial Outlook
Management provided its financial outlook for full-year 2012 and
2013. The company raised its GAAP EPS estimate for fiscal 2012 in
the $5.15-$5.25 rangewhile the same for fiscal 2013 is projected in
the $5.10-$5.30 range.
Our Recommendation
Continuous order wins, huge order backlog coupled with strong
demand of Harris' next-generation Falcon III tactical radio in the
International markets will drive the company's top-line growth
going forward.
However, a slowdown in international as well as national defense
expenditures, coupled with intense competition from the likes of
Boeing Co.
(
BA
),
General Dynamics Corp.
(
GD
) and
Raytheon Co.
(
RTN
) will create headwinds. We thus maintain our long-term Neutral
recommendation on Harris Corp.
Currently, Harris Corporation has a Zacks #3 Rank, implying a
short-term Hold rating on the stock.
BOEING CO (
BA
): Free Stock Analysis Report
GENL DYNAMICS (
GD
): Free Stock Analysis Report
HARRIS CORP (
HRS
): Free Stock Analysis Report
RAYTHEON CO (
RTN
): Free Stock Analysis Report
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