Shares of leading communications equipment and service provider Harris Corp. HRS hit a 52-week high of $86.88 on Dec 22. The Melbourne, FL-based company has been enjoying a fantastic last month of the year. The company has received over $1,033 million worth of contracts from the U.S. defense department in Dec 2015. No wonder, shares of the company have gained over 4% since the beginning of Dec 2015.
Why the Bullishness?
Harris has a strong market position in the government communications sector, with a broad product line and an enviable win rate for government defense-related communications product contracts. As a leading government electronics supplier, Harris is benefiting from the increase in U.S. defense expenditures as well as strong market conditions for RF (radio frequency) communications.
On Dec 1, Harris signed a four-year deal worth $113 million with the U.S. Naval Sea Systems Command (NAVSEA). Soon after, on Dec 7, the U.S. Army awarded the company a five-year, $800 million ceiling, multi-award IDIQ contract to provide expeditionary warfare products and services to the Army Research Lab.
Further, on Dec 17, Harris received a three-year, $54 million ceiling, single-award IDIQ contract from the U.S. Naval Research Laboratory to provide electronic warfare (EW) technology and engineering services for the Advanced Decoy Architecture Project. Finally, on Dec 21, the company won $66 million in orders to provide a Middle East nation with Falcon III wideband tactical radios and accessories as part of an overall communications modernization effort. In fact, not just in December, the company has won contracts consistently across the year.
Apart from the multiple contract wins, Harris Corp.’s acquisition of Exelis, which was completed in late May 2015, has significantly strengthened its product portfolio. Moreover, the company boasts a healthy track record with respect to earnings, having outperformed the Zacks Consensus Estimate in each of the last four quarters with an average beat of 7.89%.
We are also impressed by the company’s efforts to reward shareholders through buybacks and dividends. In Aug 2015, the company announced a 6.4% hike in its quarterly cash dividend, raising the payout to 50 cents per share.
Zacks Rank & Stock Picks
With Harris Corp. shares trading at its 52-week high, an upside hereon may be limited, as suggested by the company's Zacks Rank #3 (Hold).
Meanwhile, better-ranked stocks in the broader computer and technology sector include InterDigital, Inc. IDCC, Motorola Solutions Inc. MSI and Fitbit FIT. InterDigital sports a Zacks Rank #1 (Strong Buy), while Motorola Solutions and Fitbit carry a Zacks Rank #2 (Buy).
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