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Harris (HRS) to Report Q4 Earnings: Disappointment in Store?

Harris CorporationHRS is scheduled to report fourth-quarter fiscal 2018 results before the opening bell on Jul 31. In the last reported quarter, the company beat estimates by 5 cents. It delivered an average positive surprise of 6.2% in the trailing four quarters.

The company is likely to report higher revenues in the fiscal fourth quarter backed by healthy growth dynamics. Whether this could result into an earnings beat remains to be seen.

Top-Line Expansion

Harris' avionics systems have been an integral part of several fighter jets of the U.S. Defense, being extremely light-weight, smarter, more effective and affordable. The company is actively involved in research and development of next-generation mission computing and secure airborne communications technologies to ensure state-of-the-art products for the aviators.

At the same time, Harris has been a mission partner for the U.S. Air Force for more than seven decades. During the quarter, the company secured a contract to manufacture Hand Held Video Data Link (HH-VDL) radios to improve situational awareness and connectivity for warfighters. The current contract reinforces Harris' commitment to serve the Air Force in operations across any domain through the integration of air, space and cyber assets and is likely to augment its long-term revenues.

The lightweight HH-VDL radios offer real-time aerial view of the battlespace to the ground forces through full-motion video and sensor data feeds from aircraft or unmanned aerial systems. By seamless transfer of highly sensitive data to and from multiple airborne assets through secure transmission facilities, Harris will extend the mobile communications network of the warfighters beyond conventional sources. This, in turn, will better equip the warfighters to effectively strategize moves to counter any active threat or neutralize potential enemy action.

The real-time intelligence, surveillance and reconnaissance (ISR) information will be utilized by the U.S. Air Force to disseminate data from the air to warfighters on ground level. Harris' HH-VDL radios offer a tactical advantage to a mobile defense force and are therefore a better fit to replace the existing incumbent ground ISR terminals operating at the tactical edge of the battlespace. In addition to increased capability, the radios will leverage state-of-the-art technology via Bandwidth Efficient Common Data Link, a communications waveform that enables secure, real-time distribution of time-sensitive data and full-motion video.

With continued order momentum reflecting strength in DoD Tactical and Avionics, Harris expects healthy top-line growth. For the fiscal fourth quarter, the Zacks Consensus Estimate for total revenues is pegged at $1,618 million, up from $1,542 million reported in the year-earlier quarter. Adjusted earnings per share are pegged at $1.76, up from $1.49 reported a year ago.

Earnings Whispers

Despite top-line growth expectations, our proven model does not conclusively show that Harris is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and Zacks Consensus Estimate, is -0.34% with the former pegged at $1.75 and the latter at $1.76. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Harris Corporation Price and EPS Surprise

Harris Corporation Price and EPS Surprise | Harris Corporation Quote

Zacks Rank: Harris has a Zacks Rank #4 (Sell).

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Motorola Solutions, Inc. MSI is slated to release quarterly numbers on Aug 2. It has an Earnings ESP of +1.33% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Windstream Holdings, Inc. WIN , with an Earnings ESP of +12.15% and a Zacks Rank #2, is slated to report results on Aug 9.

Cisco Systems, Inc. CSCO has an Earnings ESP of +0.36% and a Zacks Rank #2. The company is scheduled to release earnings on Aug 15.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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