Harris Wins Maintenance Contract

Harris Corporation (HRS - Analyst Report), a leader in the public safety and professional communications market, has got an extension of its contract from the US Air Force Space Command. The company has won the fifth option year of its multi-year Network and Space Operations and Maintenance (NSOM) contract.

The NSOM contract – initially awarded in 2008 with a total order value of $418 million – is to be executed over six and a half years. The fifth option year contract, worth around $66 million, brings the total order value to $351 million to date. Harris has been supporting the US Air Force Space Command’s 50th space wing for the last seventeen years, which is indicative of the high security that its products offer.

Harris’s execution team includes Lockheed Martin Information Technology, ASRC aerospace and Avaya Government Solutions, among others. As part of the contract, Harris will provide operational and maintenance support to the Air Force Satellite Control Network’s equipment at ten different locations around the globe.

Recently, Harris declared its first-quarter fiscal 2013 results wherein earnings per share beat the Zacks Consensus Estimate. In the reported quarter, the Integrated Network Solution segment, which includes IT, Cyber and Healthcare declared a revenue decline of 10.2%.

We believe this latest contract will boost the company’s IT service revenue, which has shrank considerably in the last few quarters and consequently has dampened the Integrated Network Solution segment’s growth. Additionally, successful execution of the contract will allow the company to effectively clinch the remaining portion of the deal.

However, despite winning consistent contracts and a strong order book, Harris faces stiff competition from companies like Boeing Co. (BA - Analyst Report), General Dynamics Corp. (GD - Analyst Report) and Raytheon Co. (RTN - Analyst Report), which also provide high-end public safety communication systems.

We are maintaining our long-term ‘Neutral’ recommendation on Harris Corporation. Currently, it holds a Zacks #3 Rank, implying a short-term Hold rating.