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Harris Corp. (HRS - Analyst Report) reported financial results for the third quarter of fiscal 2014. GAAP net income from continuing operations came in at $137.1 million or $1.27 per share compared with a net income of $124.6 million or $1.12 per share in the year-ago quarter. Moreover, the reported earnings outpaced the Zacks Consensus Estimate of $1.19 per share.

However, consolidated revenues in the reported quarter stood at $1,267.5 million, up 5.3% year over year, surpassing the Zacks Consensus Estimate of $1,231 million. The third quarter saw new orders of $1.11 billion against $1.13 billion in the prior year quarter. The book-to-bill ratio stood at 0.89 for the whole quarter.
 
Cost of sales in the reported quarter was $841 million against $803.5 million in the prior-year quarter. Gross margin was 33.6% compared with 33.2% in the year-ago quarter. Engineering, selling & administrative expenses totaled $203.2 million compared with $202.5 million in the comparable year-ago quarter. Quarterly operating margin was 15.9% against 14.2% in the year-ago quarter.

At the end of the third quarter of 2014, Harris generated $454 million of cash from operations against $513.2 million in the year-earlier quarter. Free cash flow (cash flow from operations excluding capital expenditures) in the third quarter of 2014 stood at $314.3 million as against $388.3 million in the year-ago quarter.

At the end of third-quarter 2014, Harris had cash and cash equivalents of $349.6 million compared with $321 million at the end of fiscal 2013. Total debt stood at $1,575.8 million compared with $1,577.1 million at the end of fiscal 2013. The debt-to-capitalization ratio for the reported quarter was 0.47 compared with 0.58 at the end of fiscal 2013.

Government Communications System Segment

Quarterly revenues for the segment were up 9.7% year over year to $476.6 million. Operating income in the quarter was $77.4 million versus $66.5 million in the prior-year quarter. Quarterly operating margin was 16.2% against 15.9% in the year-ago quarter.

RF Communications Segment

Revenues in the quarter came in at $457.2 million, up 9.5% year over year. Tactical Radio Communications and Public Safety and Professional Communications contributed roughly 73.3% and 26.7%, respectively. Operating income was $143.7 million compared with $116.1 million in the year-ago quarter. Quarterly operating margin was 31.4% as against 27.8% in the prior-year quarter.

In the reported quarter, the segment generated orders worth $285 million from the Tactical Radio Communications business and $120 million from the Public Safety and Professional Communications business. Total order backlog stood at $680 million in the Tactical Radio Communications segment and $578 million in the Public Safety and Professional Communications segment.

Integrated Network Solutions

The segment generated revenues of $348 million, down 7.8% year over year. Operating income in the quarter was $21.4 million compared with $30.7 million in the year-ago quarter. Quarterly operating margin stood at 6.1% against 8.2% in the prior-year quarter.

Financial Outlook

For fiscal 2014, Harris increased its estimation for GAAP earnings per share from continuing operations to $4.9–$5 from $4.8–$4.9. However, the company expects its revenues to decline 2–3% from fiscal 2013.

Other Stocks to Consider

Harris currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the wireless equipment sector are ShoreTel, Inc. (SHOR - Snapshot Report), Nokia Corporation (NOK - Analyst Report) and Polycom, Inc. (PLCM - Analyst Report). All three stocks have a Zacks Rank #1 (Strong Buy).

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