Harris Corporation

Harris Corporation (HRS - Analyst Report) continues to see strong demand for its communication products worldwide as revenue rose 11% in the first quarter of 2009. Analysts project 5-year earnings growth of 14%. The company is an attractive value stock, with a forward P/E of just 8.6.

Company Description

Harris provides communication and information technology to government and commercial customers in more than 150 countries.

The company has 4 business segments: RF Communications, Government Communications Systems, Broadcast Communications, and Harris Stratex Networks, Inc.

Revenue Jumped 11% in First-Quarter 2009

On Oct 29, Harris reported first quarter fiscal 2009 earnings and saw revenue rise 11% to $1.37 billion from $1.23 billion a year ago. Net income rose 19% to $119 million, or 88 cents per share, from $100 million, or 73 cents, in the first quarter of 2008. Analysts had expected 88 cents in the quarter.

All 4 business segments saw higher revenue in the quarter. Revenue in RF Communications rose 31% year-over-year. It was higher in both the U.S. and international markets.

The company expects revenue growth to remain strong in the remainder of fiscal 2009 and beyond as U.S. allies implement defense communications modernization programs. Harris is seeing strong worldwide demand for tactical radio systems.

The Broadcast Communications segment, which had an 8% increase in year-over-year revenue, benefited from an increase in the sales of Transmission Systems, which was related to the over-the-air digital TV rollout in the U.S.. The company is also seeing increased sales due to the global transition to digital and HD products.

Plenty of Cash

Tight credit isn't Harris' problem. The company ended the first quarter 2009 with $345 million in cash and short-term investments. None of the company's long-term debt is maturing until 2016. Additionally, Harris was able to recently obtain a 5-year, $750 million revolving credit facility.

Harris Confirmed Fiscal 2009 Guidance

Despite a challenging economic environment, Harris reconfirmed is earnings forecast for fiscal 2009 in a range of $4.05 to $4.15 per share. This would represent a year-over-year earnings increase of 19 to 22% compared to 2008.

Consensus estimates are holding at $4.10 per share over the last 90 days, or in the middle of the forecast range. Analysts project earnings to grow 11.02% in fiscal 2010 over 2009. Sales growth is also expected to remain strong, with a forward forecast of 19.88%.

Value Fundamentals

Harris Corporation is a Zacks #1 Rank (strong buy) stock. It has surprised on estimates 2 out of the last 4 quarters by an average of 3.22%.

The company is trading at 8.6x forward earnings. Its price-to-book is 2.21. HRS also has an outstanding 5-year return on equity (ROE) of 17.02%. As an added bonus, the company pays a dividend with a current yield of 2.20%.