Harris Corp. Beats Q1 Earnings, Revenues; Maintains Outlook

Harris Corp. (HRS) reported financial numbers for the first quarter of fiscal 2015. GAAP net income from continuing operations came in at $125.1 million or $1.18 per share, flat year over year. The reported earnings easily surpassed the Zacks Consensus Estimate of $1.10.

Moreover, consolidated revenues in the reported quarter stood at $1,155.4 million, down 3.1% year over year. However, the figure surpassed the Zacks Consensus Estimate of $1,152 million.

Cost of sales in the reported quarter stood at $762.6 million against $774.5 million in the prior-year quarter. Gross margin was 34% compared with 35% in the year-ago quarter. Engineering, selling & administrative expenses totaled $195.2 million as against $207.8 million in the year-ago quarter. Quarterly operating margin stood at 15.2% against 15.8% in the year-ago quarter.

At the end of the first quarter of 2015, Harris generated $80.5 million of cash from operations against $172.6 million in the year-earlier quarter. Free cash flow (cash flow from operations excluding capital expenditures) in the first quarter of 2015 stood at $39.1 million versus $139.2 million in the year-ago quarter.

At the end of the reported quarter, Harris had cash and cash equivalents of $449.1 million compared with $561 million at the end of fiscal 2014. Total debt stood at $1,575.8 million, flat with the figure reported at the end of fiscal 2014. The debt-to-capitalization ratio for the reported quarter was 0.47 compared with 0.46 at the end of fiscal 2014.

Government Communications System Segment

Quarterly revenues at the segment were up 11.9% year over year to $460.7 million. Meanwhile, operating income stood at $69 million versus $64 million in the prior-year quarter. Quarterly operating margin was 16% against 15.5% in the year-ago quarter.

RF Communications Segment

Revenues in the quarter came in at $387.1 million, down 8.5% year over year. Tactical Radio Communications and Public Safety and Professional Communications segments contributed roughly 71.3% and 28.7%, respectively. Operating income was $116.7 million compared with $135.2 million in the year-ago quarter. Quarterly operating margin was 30.1% against 32% in the year-earlier quarter.

In the reported quarter, the segment generated orders worth $288 million from the Tactical Radio Communications business and $86 million from the Public Safety and Professional Communications business. Total order backlog stood at $575 million in the Tactical Radio Communications segment and $532 million in the Public Safety and Professional Communications segment. The book-to-bill ratio for the segment stood at 0.97.

Integrated Network Solutions

The segment generated revenues of $325.7 million, down 13.3% year over year. Operating income in the quarter was $23.1 million compared with $29.7 million in the year-ago quarter. Quarterly operating margin stood at 7.1% against 7.9% in the year-earlier quarter.

Financial Outlook

For fiscal 2015, Harris retains its guidance for GAAP earnings per share from continuing operations at $4.75–$5. Moreover, the company expects revenues to decline 1–3% from fiscal 2014.

Stocks to Consider

Harris currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the wireless equipment sector are QUALCOMM Incorporated (QCOM), BlackBerry Limited (BBRY) and Calix Inc. (CALX). Qualcomm sports a Zacks Rank #1 (Strong Buy) while BlackBerry and Calix have a Zacks Rank #2 (Buy).