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Harris Corporation is an international communications and information technology company. Its operating divisions serve markets for government communications, RF communications, broadcast communications and microwave communications.
When HRS was presented for a second time as a Growth and Income pick on Jul 7, the company exceeded analysts earnings expectations for five straight quarters. When the company reported its first-quarter fiscal 2007 results, it marked the seventh consecutive quarter in which it surprised to the upside. During this time period, HRSs average margin of surprise was 7.8%.
On Oct 25, HRS posted first-quarter profits of $96.8 million, or 69 cents per share. Analysts were calling for 65 cents. Compared to profits of $65.4 million, or 47 cents per share in the prior-year period, earnings soared 46.8%. Revenues jumped 24.6% to $946.8 million, versus $759.7 million in the first quarter of fiscal 2006. HRS is expected to release its second-quarter results on Jan 24.
Chairman, President and CEO Howard L. Lance stated, Organic revenue growth continued very strong at 18%. Orders grew in each business segment, significantly outpacing revenue, and the new opportunity funnel continues to be strong. HRS increased revenues and expanded gross margins for the past four years, while growing profits for three years running.
In addition to posting solid results for the first quarter, HRS raised its earnings per share guidance for the full year to between $2.70 and $2.80. The company previously called for profits between $2.65 and $2.75 per share.
Analysts responded to the companys bullish outlook by increasing their earnings estimates for this year by six cents to $2.76. They also boosted their profit forecasts for fiscal 2008 by 10 cents to $3.08. Earnings per share are projected to grow 14.3% over the next 3-5 years.
On Oct 27, the Board of Directors declared a quarterly cash dividend of 11 cents per common share of stock. Due to increasing free cash flow levels, the company has a current dividend yield of 0.95% and a five-year average dividend yield of 0.82%. Its return on equity dwarfs that of the industry average21% compared to 5%.
HRS is a Zacks #2 Rank (Buy) stock. Zacks #2 Rank stocks have generated an average annual return of 21.6% since 1988. Because the Zacks Rank has a market cap bias, Growth & Income investors may find a greater number of large-cap stocks by considering both Zacks #1 Rank (Strong Buy) and Zacks #2 Rank (Buy) stocks in their selection criteria.
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