Will Harris (HRS) Surprise Earnings Estimates in Q2?

Harris Corp. (HRS) is expected to release its second-quarter 2015 financial numbers on Jan 27.

In the last quarter, the company delivered a positive 7.27% earnings surprise. Meanwhile, in all four quarters last year, the company delivered positive earnings surprises, with an average beat of 5.83%.

Let’s see how things are shaping up for this announcement.

Factors to be Considered

Harris primarily depends on U.S. government contracts for a major portion of its revenues. Any additional federal budgetary pressure may result in substantial cuts in defense spending, which may significantly impact the company’s business.

Furthermore, a shift in the government’s foreign policy may result in the termination of some important international contracts. Additional risks may emanate from large scale, long-term fixed-priced contracts, if costs escalate beyond contract pricing. Also, we believe that the ongoing defense budget contraction will continue to affect Harris in the upcoming quarter.

Earnings Whispers

Our proven model does not conclusively show that Harris is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or at least 3 for this to happen. That is not the case here, as you will see below:

Zacks ESP: The Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Thus, the ESP for the company currently stands at -0.86% as the Most Accurate estimate is pegged at $1.16 while the Zacks Consensus Estimate is higher at $1.17.

Zacks Rank: Harris’ Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Please note that the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter.

American Tower Corporation (AMT) with an earnings ESP of +4.00% and a Zacks Rank #3.

Comcast Corp. (CMCSA) with an earnings ESP of +1.30% and a Zacks Rank #3.

Time Warner Cable Inc. (TWC) with an earnings ESP of +2.38% and a Zacks Rank #3.