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Why is Harris Corp (HRS) Up 5.2% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Harris Corporation . Shares have added about 5.2% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Second-Quarter Earnings

Harris Corp. reported second-quarter fiscal 2017 earnings (on an adjusted basis for the quarter ended Dec 30, 2016) of $1.42 per share beat the Zacks Consensus Estimate by $0.05. Quarterly earnings declined 4.7% on a year-over-year basis. Revenues in the second quarter came in at $1.7 billion. The top line missed the Zacks Consensus Estimate of $1.76 billion and declined from the year-ago figure.

Cost of product sales and services in the reported quarter was $1,138 million compared with $1,203 million in the prior-year quarter. Engineering, selling & administrative expenses totaled $276 million in the quarter under review as against $217 million in the second quarter of fiscal 2016.

Segmental Performance

Revenues at the Communication Systems segment came in at $413 million in the quarter, down 16%. Segmental operating income declined significantly to $121 million due to lower volumes.

Revenues at the Space and Intelligence Systems unit were $468 million, up 5%. The upside was driven by multiple factors, including higher revenues from intelligence community customers. Operating income for the segment was $77 million, up 13.2%. Results were boosted by a strong program performance as well as higher pension income.

Revenues at the Electronic Systems unit totaled $384 million, up 1%. The top line expanded 6% on an organic basis. Segmental operating income was $79 million, up 14%.

Revenues at the Critical Networks unit grossed $454 million, up 2%. Increased revenues from FAA NextGen modernization programs and NASA’s Space Communications Network program drove the upside. Operating income at the segment improved to $75 million.

At the end of the reported quarter, the company had cash and cash equivalents of $361 million compared with $487 million at the end of fiscal 2016. Total long-term debt at the end of fiscal second quarter was $4,087 million compared with $4,120 million at the end of fiscal 2016.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been four downward revisions for the current quarter. In the past month, the consensus estimate has shifted 10.19% downward due to these changes.

Harris Corporation Price and Consensus

 

Harris Corporation Price and Consensus | Harris Corporation Quote

VGM Scores

At this time, the stock has a nice Growth Score of 'B', though it is lagging a bit on the momentum front with a 'C'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregte VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.

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