A Mixed Bag for Harris - Analyst Blog
29 Gennaio 2013 - 2:55PM
Zacks
Harris Corp. (HRS) reported mixed financial
results for the second quarter of fiscal 2013. GAAP net income from
continuing operations was $138.5 million or $1.25 per share
compared with a net income of $134.8 million or $1.19 per share in
the year-ago quarter. Quarterly earnings per share of $1.25 easily
outpaced the Zacks Consensus Estimate of $1.20.
However, consolidated revenue in the reported quarter stood at
$1,286.9 million, down 1.8% year over year, missing the Zacks
Consensus Estimate of $1,307 million. Harris currently carries a
Zacks Rank #4 (Sell).
Cost of sales in the reported quarter was $845.4 million against
$856 million in the prior-year quarter. Gross margin was 34.3%
compared with 34.7% in the prior-year quarter. Engineering, selling
& administrative expenses were $213.1 million versus $222.3
million in the year-ago quarter.
Quarterly operating margin was 15.6% compared with 15.7% in the
year-ago quarter. Total new orders in the second quarter were $1.36
billion against $1.04 billion in the prior-year quarter.
In the first half of fiscal 2013, Harris generated $279.5
million in cash from operations compared with $278 million in the
prior-year period. Free cash flow (cash flow from operations
excluding capital expenditures) for the reported period was $199.6
million compared with $166.7 million in the year-ago period.
At the end of the reported quarter, Harris had cash and cash
equivalents of $328.1 million compared with $356.0 million at the
end of fiscal 2012. Total debt at the end of the second quarter was
$1,929.9 million compared with $1,883.0 million at the end of
fiscal 2012. Debt-to-capitalization ratio was 0.51 compared with
0.49 at the end of fiscal 2012.
Government Communications System Segment
Quarterly revenue for the segment improved 4% year over year to
$438.8 million. Operating income in the quarter was $65.5 million
versus $62.9 million in the prior-year quarter. Quarterly operating
margin was 14.9%, remaining the same year over year.
During the quarter, Harris received $242 million of orders.
Harris was one of twenty prime contractors, chosen to complete the
work of a 5-year Global Tactical Advanced Communication Systems
IDIQ contract, worth $10 billion.
RF Communications Segment
Revenue in the quarter was $486 million, down 7.6% year over
year. “Tactical Radio Communications” and “Public Safety and
Professional Communications” contributed roughly 69.3% and 30.7%,
respectively. Operating income was $151 million compared with
$172.4 million in the year-ago quarter. Quarterly operating margin
was 31.1% against 32.8% in the year-ago quarter.
In the reported quarter, the segment generated new orders worth
$402 million with $287 million in the Tactical Radio Communications
business and $115 million in the Public Safety and Professional
Communications business. Total order backlog in the Tactical Radio
Communications segment was $561 million and $581 million in Public
Safety and Professional Communications.
Integrated Network Solutions
The segment generated revenues of $396.3 million, up 3% year
over year. Operating income in the quarter was $32.4 million
compared with $19.5 million in the year-ago quarter. Quarterly
operating margin was 8.2% compared with 5.1% in the prior-year
quarter.
Financial Outlook
Due to significant reduction in government spending, Harris now
declared that its fiscal 2013 revenue will decline 2-4% year over
year against its previous guidance of a yearly decline of 0-2%. For
fiscal 2013 earnings per share from continuing operations are now
projected to be in the range of $5.00-$5.20 compared with the prior
guidance of $5.10-$5.30.
Other Stocks to Consider
Other stocks to consider in the defense sector and public safety
are General Dynamics Corp. (GD), The
Boeing Co. (BA) and Motorola Solutions
Inc. (MSI). While net earnings of General Dynamics missed
the Zacks Consensus Estimate in the most recent quarter, Motorola
Solutions handily beat the Zacks Consensus Estimate. The Boeing
will release its earnings results tomorrow.
General Dynamics currently has a Zacks Rank #5 (Strong Sell),
while both Motorola Solutions and Boeing currently have a Zacks
Rank #3 (Hold).
BOEING CO (BA): Free Stock Analysis Report
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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