), a leading defense wireless device supplier, is suffering from
tight U.S. government spending for defense and a slowdown in
international defense expenditures. Yesterday, the company
announced its recently concluded third quarter fiscal 2013
preliminary financial results.
Net earnings per share from continuing operation will be
approximately $1.12, which is significantly below the current
Zacks Consensus Estimate of $1.26 per share. Similarly, total
revenue is expected to be around $1.20 billion, well below the
current Zacks Consensus Estimate of $1.326 billion.
The reduction in budget spending that began last month has
resulted in delays in tactical radio procurements. This has in
turn raised concerns that major tactical radio orders from
international markets will also be delayed to later this fiscal
or early next fiscal.
At the same time, demand for the high-margin Integrated
Network Solutions products were weaker than expected due to a
delay in the Healthcare software release and poor performance by
the CapRock Communications division.
For the second time in the last one year, Harris reduced its
guidance for full year 2013. On a GAAP basis, earnings per share
are now expected to be within the range of $3.95 to $4.33. The
revised guidance for adjusted earnings per share for fiscal 2013
was $4.60 to $4.70 compared with the prior guidance of $5.00 to
$5.20. The first guidance range was $5.10 to $5.30. Total revenue
for fiscal 2013 is now expected to decline by 6% to 7% year over
year compared with the prior estimate of a decline of 2% to
Harris depends on the U.S. government contracts for a major
part of its revenue. The U.S. is expected to reduce its activity
in South-East Asia. Furthermore, a shift in the U.S. government
policy in foreign relations may result in the termination of some
major international contracts.
To cope up with this juncture, Harris has decided on headcount
reduction and curtails its expenses. These cost-control measures
will result in $65 million to $115 million pre-tax charges but
annual cost savings of $40 million to $50 million.
Other Stocks to Consider
Harris currently holds a Zacks Rank #3 (Hold). Other stocks in
this industry that are performing better include
Ubiquiti Networks Inc.
Sonus Networks Inc.
). All the three stocks carry a Zacks Rank #2
HARRIS CORP (HRS): Free Stock Analysis Report
INTERDIGITL INC (IDCC): Free Stock Analysis
SONUS NETWORKS (SONS): Free Stock Analysis
UBIQUITI NETWRK (UBNT): Free Stock Analysis
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