FAA Rewards Harris a Big Contract

Harris Corporation ( HRS - Analyst Report ) – a leader in the public safety and professional communication market, has received a seven-year contract worth $331 million that entails them to provide highly reliable air and ground data communications services for a key Federal Aviation Administration (FAA) program.

Per the terms of the Data Communication Integrated Service (DCIS) contract the Melbourne, Florida-based company will provide management and delivery of data communication service that will transform voice-based air traffic control (ATC) to automated air traffic management for future requirement. The contract also contains 10 one-year options that could extend the duration till 2029.

The Harris DCIS team includes leading aviation and communications innovators with huge experience and includes Adfero Group, American Airlines, a subsidiary of AMR Corporation ( AAMRQ ) , ARINC, The Brattle group, CGH, General Electric Company ( GE - Analyst Report ) and six other companies. The DCIS contract will offer highly reliable ATC communications, improved arrival/departure routes, and reduced emissions propelling fuel efficiency as a result.

Since long, Harris has been developing and integrating system solutions for the FAA in support of the National Airspace System (NAS). We believe the contract will not only strengthen its Government Communication Systems order book but will also provide solid stability to the above-mentioned segment. The company will continue to win many such contracts as it has been selected as a prime contractor for FAA Telecom infrastructure (FTI) initiative of National Airspace System (NAS).

The current Zacks Consensus Estimate for Harris Corp. is pegged at $1.12 for the fiscal first quarter 2013 with a growth rate estimate of 5.92%. For fiscal years 2013 and 2014, the Zacks Consensus Estimates stand at $5.15 and $5.28 with a growth rate of (0.91%) and 2.52% respectively.

Recommendation:

Considering the fundamentals, we maintain our long-term Neutral recommendation on Harris Corp. Currently, HRS has a Zacks #3 Rank, implying a short-term Hold rating on the stock.