On Sep 18, we maintained our Neutral recommendation on
). The company reported mixed fourth-quarter 2013 results with
the bottom line missing the Zacks Consensus Estimate but the top
line beating the same.
Why Reiterated at Neutral?
Recently, Harris won a $960-million major deal from the U.S. Air
force Network-Centric Solutions-2 (NETCENTS-2) Application
Services. Per the deal, Harris will supply indefinite amount of
IT related products and services for three years. Additionally,
Harris has won several orders for its tactical radio products
from the international markets, which will not only strengthen
its order book, but will also compensate the weakness in the
Moreover, the company is on the verge of signing deals with four
major airlines on DCIS equipage and has won $150 million contract
for a period of seven years from the Federal Aviation
Administration's (FAA) NextGen Data Communications Program. Such
robust growth prospects have induced the company to provide an
improved financial guidance for fiscal 2013.
Harris mostly depends on the U.S. Government contracts for a
major part of its revenues. The Defense Department has decided to
reduce its budget by nearly $500 billion over the next decade. In
the future, any additional Federal budgetary pressures may result
in deeper-than-expected cuts in defense spending, which may
significantly impact the company's business prospects.
Furthermore, a shift in the U.S. Government's foreign policy
may result in the termination of some major international
contracts. Additional risks may emanate from large-scale
long-term fixed-priced contracts if costs escalate beyond
BOEING CO (BA): Free Stock Analysis Report
GENL DYNAMICS (GD): Free Stock Analysis
HARRIS CORP (HRS): Free Stock Analysis Report
MOTOROLA SOLUTN (MSI): Free Stock Analysis
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We believe that the ongoing defense budget contraction will
continue to affect Harris in the long run. Moreover, demand for
the high-margin Integrated Network Solution products is weaker
than expected primarily due to a delay in the healthcare software
Harris currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
The stocks that are performing better in the defense sector and
public safety are
General Dynamics Corp.
The Boeing Co.
Motorola Solutions Inc.
). All three have a Zacks Rank #3 (Hold).