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On Jun 27, 2014, we issued an updated research report on Harris Corp. (HRS - Analyst Report). Despite government spending cuts, improved foreign defense expenditure, a strong tactical radio order pipeline and growth in the Government Communication segment are likely to act as catalysts for the company moving ahead.

Harris has delivered positive earnings surprises in all four quarters last year, with an average beat of 10.84%. The company reported third-quarter 2014 financial results where both the top and the bottom line surpassed the Zacks Consensus Estimate.

Recently, Harris won a $78 million deal from a Central Asian country for the supply of Integrated Tactical Area Communications Systems. In the third quarter, Harris won two indefinite quantity (IDIQ) deals from the U.S. army for the supply of Soldier Radio Waveform (SRW) vehicular appliqué systems. The $988 million SRW Appliqué Radio Systems contract was awarded to four major companies including Harris.

Harris is also highly optimistic about the launch of the wideband HF radio and the multiband handheld radio which have already contributed $100 million in the reported quarter.

Harris has also been selected as one of the 20 contractors to compete for the Global Tactical Advanced Communications Systems contract initiated by the U.S. Army’s Program Executive Office-Command Communications and Control. The total value of the 5-year contract stands at $10 billion for the supply of advanced communications technologies such as wireless networking and tactical satellite communications.

On the downside, reduced U.S. government spending has affected the company’s financials. The reduction in budget spending since March resulted in delays in tactical radio order procurement and aggravated the concern that major tactical radio orders from international markets will be postponed to later this fiscal year or beginning of the next. Meanwhile, the stock is fairly valued at current levels while the price soared nearly 56% in the last year and is currently trading at the high-end of its 52-week price range.

Harris currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Other stocks worth considering in this sector include InterDigital Inc. (IDCC - Snapshot Report), Comtech Telecommunications Corp. (CMTL - Snapshot Report) and Qualcomm Inc. (QCOM - Analyst Report). Both InterDigital and Comtech have a Zacks Rank #1 (Strong Buy) while Qualcomm carries a Zacks Rank #2 (Buy).

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