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Harris (HRS) Tops Earnings, Lags Revenue Estimates in Q4

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Harris Corporation reported fourth-quarter fiscal 2016 earnings (on an adjusted basis: ended Jul 1, 2016) of $1.45 per share, beating the Zacks Consensus Estimate by a penny.

Quarterly earnings were 9.85% above the year-ago figure. The Exelis acquisition, completed in May 2015, boosted the quarter’s results. Revenues of $1.90 billion fell short of the Zacks Consensus Estimate of $1.93 billion. Revenues, however, improved 24.05% from the year-ago quarter, thanks to the Exelis buyout.

Cost of product sales and services in the reported quarter was $1,319 million compared with $1,024 million in the prior-year quarter. Engineering, selling & administrative expenses totaled $309 million in the quarter under review versus $373 million in the fourth quarter of fiscal 2015.

At the end of the reported quarter, the company had cash and cash equivalents of $487 million compared with $481 million at the end of the final quarter of fiscal 2015. Total long-term debt at the end of fourth-quarter fiscal 2016 was $4,120 million, compared with $5,053 million at the end of fourth-quarter fiscal 2015.

The company also inked a deal with JANA Partners (one of the company’s top ten shareholders) for the appointment of two independent directors to its board.

Segmental Performance

This was the fourth full quarter at Harris following the Exelis acquisition. With effect from the first quarter of fiscal 2016, the company has been reporting under four operating units, namely, Communication Systems, Critical Networks, Electronic Systems and Space and Intelligence Systems.

Revenues at the Communication Systems segment came in at $436 million in the quarter. Segmental operating income (on an adjusted basis) stood at $120 million.

Revenues at the Space and Intelligence Systems unit were $529 million. Operating income for the segment was $83 million.

Revenues at the Electronic Systems unit totaled $381 million. Segmental operating income (on an adjusted basis) stood at $73 million.

Revenues at the Critical Networks unit grossed $575 million. Operating income at the segment (on an adjusted basis) stood at $81 million.

Annual Results

For fiscal 2016, the company reported earnings (on an adjusted basis) of $5.70 per share, in line with the Zacks Consensus Estimate. Earnings were up 10.9% on a year-over-year basis. For fiscal 2016, the company reported revenues of $7.47 billion, below the Zacks Consensus Estimate of $7.51 billion. Revenues improved 47% on a year-over-year basis.

HARRIS CORP Price, Consensus and EPS Surprise

HARRIS CORP Price, Consensus and EPS Surprise | HARRIS CORP Quote

FY17 View

The company expects earnings per share (on an adjusted basis) in the band of $5.70 to $5.90 for fiscal 2017. The Zacks Consensus Estimate for the fiscal stands at $5.93 per share, above the guided range. The company now projects fiscal 2017 revenues in the band of $7.11 billion to $7.33 billion. The Zacks Consensus Estimate currently stands at $7.56 billion for fiscal 2017, again above the projected range.

Zacks Rank & Key Picks

Currently, Harris has a Zacks Rank #4 (Sell). Better-ranked stocks in the broader Computer & Technology space include Citrix Systems Inc. , Plexus (PLXS - Free Report) and Intel Corporation (INTC - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy).

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