Harris Corporation HRS is scheduled to report its fourth-quarter fiscal 2015 financial numbers on Aug 7, before the opening bell.
Harris Corporation has a healthy track record with respect to earnings. The company has delivered positive earnings surprises in each of the last four quarters, with an average beat of 7.05%. Let’s see how things are shaping up for this announcement.
Factors at Play
We expect soft revenues to hurt the company’s results in the final quarter of fiscal 2015. Public Safety, IT Services and CapRock energy operations are expected to report weak revenues thereby hindering overall growth.
It is worth noting that the company primarily depends on U.S. government contracts for a major portion of its revenues. Any federal budgetary pressure would thus result in substantial cuts in defense spending, which in turn, will significantly impact the company’s business.
The final quarter of fiscal 2015 saw Harris completing the acquisition of Exelis. Acquisition-related costs will thus impact the bottom line. In fact, this will be the last quarter, when the company reports through the Government Communications Systems Segment, RF Communications Segment and the Integrated Network Solutions Segment.
Following the closure of the Exelis acquisition, the company restructured its business. Effective first-quarter fiscal 2016, Harris will report in the form of the following segments: Space and Intelligence Systems, Communication Systems, Critical Networks and Electronic Systems. We expect the company to shed further light on the new business units and the Exelis integration process on the fourth quarter conference call.
Earnings Whispers
Our proven model does not conclusively show that Harris Corporation 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 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:
Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Thus, the ESP for the company stands at -0.83% as the Most Accurate estimate is pegged at $1.20 while the Zacks Consensus Estimate is a penny higher.
Zacks Rank: Harris Corporation has a Zacks Rank #3 which increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings beat.
Note that the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
Stocks to Consider
Here are some companies worth considering instead as our model shows they have the right combination of elements to post an earnings beat this quarter.
Tangoe, Inc. TNGO has an earnings ESP of +14.29% and a Zacks Rank #3. The company will report second-quarter 2015 results on Aug 6.
StealthGas, Inc. GASS has an earnings ESP of +9.09% and a Zacks Rank #3. The company is expected to report second-quarter results on Aug 27.
Frontline Ltd. FRO has an earnings ESP of +14.29% and a Zacks Rank #2. The company is expected to report second-quarter results on Aug 27.
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