Harris Remains Neutral - Analyst Blog
20 Novembre 2012 - 4:10PM
Zacks
Harris Corp. (HRS)
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 communications market.
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 likes of General Dynamics
Corp. (GD) and Motorola Solutions, Inc.
(MSI) may put Harris on the back foot in the near term.
GENL DYNAMICS (GD): Free Stock Analysis Report
HARRIS CORP (HRS): Free Stock Analysis Report
MOTOROLA SOLUTN (MSI): Free Stock Analysis Report
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