Harris Corporation (HRS), a leader in the public safety and professional communication market, has won a long-term National Airspace System Voice Communication (NVS) contract from the Federal Aviation Administration (FAA).
The $291 million contract extends over a period of 15 years and will provide an Internet protocol (IP) network for the FAA based on its Commercial off-the-shelf (COTS) voice communication solution VCS21. The NVS will be installed in air traffic control (ATC) facilities all across the U.S. and will provide secure digital communications for pilots, controllers and ground personnel.
Harris is set to offer network integration and management services and will also provide business continuity planning along with asset sharing.
Recently, Harris declared its fiscal fourth-quarter 2012 financial results with EPS surpassing the Zacks Consensus Estimate. In the reported quarter, Government Communication System segment revenue dipped 0.5% year over year to $497.2 million.
Harris has been providing voice, data and video communication services for National Air Service (NAS). We believe this contract will strengthen the company’s Government Communication System order book as the company continues to benefit from FAA’s initiative to modernize the U.S. air traffic control system with a next generation communication network.
However, slowdown in international as well as national defense expenditures coupled with intense competition from the likes of General Dynamics Corp. (GD) and Motorola Solutions, Inc. (MSI) may set Harris back.
The current Zacks Consensus Estimate for Harris Corp. is pegged at $1.12 for the fiscal first quarter of 2013, with a growth rate estimate of 5.57%. For fiscal years 2013 and 2014, the Zacks Consensus Estimates stand at $5.14 and $5.26, with a growth rate of (1.07%) and 2.17%, respectively.
Recommendation
We maintain our long-term Neutral recommendation on Harris Corp. Currently, HRS has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
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