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Harris Corp. (HRS - Analyst Report) reported mixed financial results for the first quarter of fiscal 2014. GAAP net income from continuing operations was $127.4 million or $1.18 per share compared with a net income of $128.3 million or $1.14 per share in the year-ago quarter. Moreover, the reported earnings surpassed the Zacks Consensus Estimate of $1.13 per share.

Consolidated revenues in the reported quarter stood at $1,191.9 million, down 5.5% year over year, missing the Zacks Consensus Estimate of $1,223 million. Harris currently carries a Zacks Rank #2 (Buy).

Cost of sales in the reported quarter was $774.5 million against $848.3 million in the prior-year quarter. Gross margin was 35% compared with 32.8% in the year-ago quarter. Engineering, selling & administrative expenses were $207.8 million versus $198.2 million in the comparable year-ago quarter. Quarterly operating margin was 15.8% compared with 14.9% in the year-ago quarter. The first quarter saw new orders of $1.20 billion against $1.43 billion in the prior quarter.

At the end of the first quarter of fiscal 2014, Harris generated $172.6 million in cash from operations compared with $120.5 million in the prior-year quarter. Free cash flow (cash flow from operations excluding capital expenditures) was $139.2 million against 80.6 million in the year-ago quarter.

At the end of the reported quarter, Harris had cash and cash equivalents of $337.2 million compared with $321 million at the end of fiscal 2013. Total debt was $1,577.1 million, flat with the figure reported at the end of fiscal 2013. The debt-to-capitalization ratio was 0.49 compared with 0.50 at the end of fiscal 2013.

Government Communications System Segment

Quarterly revenues for the segment fell 9.4% year over year to $411.6 million. Operating income in the quarter was $64 million versus $66.4 million in the prior-year quarter. Quarterly operating margin was 15.5% against 14.6% in the year-ago quarter.

RF Communications Segment

Revenues in the quarter were $423 million, down 4.9% year over year. “Tactical Radio Communications” and “Public Safety and Professional Communications” contributed roughly 72% and 28%, respectively. Operating income was $135.2 million compared with $134.1 million in the year-ago quarter. Quarterly operating margin was 32% against 30.2% in the prior-year quarter.

In the reported quarter, the segment generated orders worth $348 million, $225 million from the Tactical Radio Communications business and $123 million from the Public Safety and Professional Communications business. Total order backlog in the Tactical Radio Communications segment was $664 million and $607 million in the Public Safety and Professional Communications segment.

Integrated Network Solutions

The segment generated revenues of $375.6 million, down 2.6% year over year. Operating loss in the quarter was $29.7 million compared with an operating profit of $33.1 million in the year-ago quarter.

Financial Outlook

For fiscal 2012, Harris expects GAAP earnings per share of $4.65–$4.85 from continuing operations However, the company maintained that its fiscal 2014 revenues will grow by 1% to 3% from fiscal 2013.

Other Stocks to Consider

The stocks which are performing better in the similar sector are ShoreTel, Inc. (SHOR - Snapshot Report), Novatel Wireless Inc. (NVTL - Analyst Report) and Motorola Solutions Inc. (MSI - Analyst Report). Both, Novatel and Motorola Solutions have a Zacks Rank #2 (Buy) while ShoreTel has a Zacks Rank #1 (Strong Buy).

 

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