) reported mixed financial results for the first quarter of
fiscal 2013. Harris is facing several near-term concerns as the
contraction of the U.S. and international defense expenditures
may act as major threats to the company. Though management
remains confident that the company's consolidated pipeline
opportunity is still intact, we are not sure exactly when these
contracts are going to be realized.
In order to minimize the negatives of defense budget
contraction, Harris is emphasizing other business verticals
including, IT transformation of the healthcare industry, public
safety communications and maritime communications. Management is
gradually disinvesting its non-core businesses. Further, Harris
is paying regular dividend, maintaining a systematic share
buyback program, generating increasing free cash flow, apart from
currently trading at attractive multiples. We, thus, reaffirm our
Neutral recommendation on Harris.
The acquisition of CapRock Communications gives Harris a
strong foothold in the lucrative energy market. CapRock is a
global provider of managed satellite communications solutions for
energy, government, and maritime industries. Similarly, the
acquisition of Global Connectivity Services (GCS) business from
Schlumberger Ltd has significantly enhanced Harris' capability in
the mission-critical and end-to-end managed satellite
The acquisition of M/A-COM public safety business is also
generating synergies for Harris' existing land mobile radio
business. Integration of high-end solutions of M/A-COM enables
Harris to gain a strong foothold in the global Public Safety and
Professional Communications market.
However, a slowdown in international as well as domestic
defense expenditurescoupled with intense competition from the
General Dynamics Corp.
Motorola Solutions, Inc.
) may put Harris on the back foot in the near term.
GENL DYNAMICS (GD): Free Stock Analysis
HARRIS CORP (HRS): Free Stock Analysis Report
MOTOROLA SOLUTN (MSI): Free Stock Analysis
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