Harris Corp. ( HRS - Analyst Report ) declared fourth quarter 2012 financial results, where EPS meet the Zacks Consensus Estimates but revenue missed.

Reported GAAP net loss in the quarter was $136.7 million or $1.20 per share compared with $133.6 million or $1.06 per share in the year-ago quarter. Quarterly adjusted (excluding acquisition related cost) earnings per share (EPS) of $1.42 were in line with the Zacks Consensus Estimate.

Consolidated revenue in the reported quarter stood at $1,436.2 million, down 5.57% year over year and also below the Zacks Consensus Estimate of $1,451 million.

Cost of sales in the quarter was $939.6 million compared with 1,013.5 million in the prior-year quarter. Engineering, selling & administrative expenses were $225.4 million versus $247.5 million in the year-ago quarter.

At the end of the fourth quarter of fiscal 2012, Harris generated $852.9 million in cash from operations compared with $833.1 million in the prior-year quarter. Free cash flow (cash flow from operations excluding capital expenditures) for the period was $643 million compared with $521.8 million in the year-ago quarter.

At the end of the reported quarter, Harris had cash and cash equivalents of $356 million compared with $366.9 million at the end of fiscal 2011. Total debt at the end of the quarter was $1,883 million compared with $1,887.2 million at the end of fiscal 2011. Debt-to-capitalization ratio was 0.49 compared with 0.43 at the end of 2011.

Government Communications System Segment

Quarterly revenue for the segment dipped 0.5% year over year to $497.2 million. Operating income in the quarter was $66.1 million versus $63.2 million in the prior-year quarter. Quarterly operating margin was 13.3% compared with 12.7% in the year-ago quarter.

RF Communications Segment

Revenue in the quarter was $583.6 million, down 7.1% year over year. “Tactical Radio Communications” and “Public Safety and Professional Communications” contributed roughly 70% and 30%, respectively. Operating income was $195.7 million compared with $190.7 million in the year-ago quarter. Quarterly operating margin was 33.5% compared with 30.4% in the year-ago quarter.

In the reported quarter, the segment generated new orders worth $529 million with $356 million in the Tactical Radio Communications business and $173 million in the Public Safety and Professional Communications business. Total order backlog in the Tactical Radio Communications segment was $665 million and $635 million in Public Safety and Professional Communications.

Integrated Network Solutions

The segment generated revenues of $379 million, down 9.6% year over year. Operating income in the quarter was $34.1 million compared with $33.1 million in the year-ago quarter. Quarterly operating margin was 9% compared with 7.9% in the year-ago quarter.

Financial Outlook

Management provided its financial outlook for full-year 2013. GAAP EPS guidance for fiscal 2013 remained unchanged at $5.10–$5.30. The company expects revenue growth of 0% to 2% for fiscal 2012.

Our Recommendation

Continuous order wins, huge order backlog coupled with strong demand for Harris’ next-generation Falcon III tactical radio in the international markets will drive top-line growth going forward.

However, the slowdown in international as well as national defense expenditures coupled with intense competition from the likes of General Dynamics Corp. ( GD - Analyst Report ) and Motorola Solutions, Inc. ( MSI - Analyst Report ) will set Harris back. We thus maintain our long-term Neutral recommendation on Harris Corp.

Currently, Harris Corporation has a Zacks #3 Rank, implying a short-term Hold rating on the stock.