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Harris Corp. (HRS - Analyst Report) reported mixed financial results for the second quarter of fiscal 2013. GAAP net income from continuing operations was $138.5 million or $1.25 per share compared with a net income of $134.8 million or $1.19 per share in the year-ago quarter. Quarterly earnings per share of $1.25 easily outpaced the Zacks Consensus Estimate of $1.20.

However, consolidated revenue in the reported quarter stood at $1,286.9 million, down 1.8% year over year, missing the Zacks Consensus Estimate of $1,307 million. Harris currently carries a Zacks Rank #4 (Sell).

Cost of sales in the reported quarter was $845.4 million against $856 million in the prior-year quarter. Gross margin was 34.3% compared with 34.7% in the prior-year quarter. Engineering, selling & administrative expenses were $213.1 million versus $222.3 million in the year-ago quarter.

Quarterly operating margin was 15.6% compared with 15.7% in the year-ago quarter. Total new orders in the second quarter were $1.36 billion against $1.04 billion in the prior-year quarter.

In the first half of fiscal 2013, Harris generated $279.5 million in cash from operations compared with $278 million in the prior-year period. Free cash flow (cash flow from operations excluding capital expenditures) for the reported period was $199.6 million compared with $166.7 million in the year-ago period.

At the end of the reported quarter, Harris had cash and cash equivalents of $328.1 million compared with $356.0 million at the end of fiscal 2012. Total debt at the end of the second quarter was $1,929.9 million compared with $1,883.0 million at the end of fiscal 2012. Debt-to-capitalization ratio was 0.51 compared with 0.49 at the end of fiscal 2012.

Government Communications System Segment

Quarterly revenue for the segment improved 4% year over year to $438.8 million. Operating income in the quarter was $65.5 million versus $62.9 million in the prior-year quarter. Quarterly operating margin was 14.9%, remaining the same year over year.

During the quarter, Harris received $242 million of orders. Harris was one of twenty prime contractors, chosen to complete the work of a 5-year Global Tactical Advanced Communication Systems IDIQ contract, worth $10 billion.

RF Communications Segment

Revenue in the quarter was $486 million, down 7.6% year over year. “Tactical Radio Communications” and “Public Safety and Professional Communications” contributed roughly 69.3% and 30.7%, respectively. Operating income was $151 million compared with $172.4 million in the year-ago quarter. Quarterly operating margin was 31.1% against 32.8% in the year-ago quarter.

In the reported quarter, the segment generated new orders worth $402 million with $287 million in the Tactical Radio Communications business and $115 million in the Public Safety and Professional Communications business. Total order backlog in the Tactical Radio Communications segment was $561 million and $581 million in Public Safety and Professional Communications.

Integrated Network Solutions

The segment generated revenues of $396.3 million, up 3% year over year. Operating income in the quarter was $32.4 million compared with $19.5 million in the year-ago quarter. Quarterly operating margin was 8.2% compared with 5.1% in the prior-year quarter.

Financial Outlook

Due to significant reduction in government spending, Harris now declared that its fiscal 2013 revenue will decline 2-4% year over year against its previous guidance of a yearly decline of 0-2%. For fiscal 2013 earnings per share from continuing operations are now projected to be in the range of $5.00-$5.20 compared with the prior guidance of $5.10-$5.30. 

Other Stocks to Consider

Other stocks to consider in the defense sector and public safety are General Dynamics Corp. (GD - Analyst Report), The Boeing Co. (BA - Analyst Report) and Motorola Solutions Inc. (MSI - Analyst Report). While net earnings of General Dynamics missed the Zacks Consensus Estimate in the most recent quarter, Motorola Solutions handily beat the Zacks Consensus Estimate. The Boeing will release its earnings results tomorrow.

General Dynamics currently has a Zacks Rank #5 (Strong Sell), while both Motorola Solutions and Boeing currently have a Zacks Rank #3 (Hold).

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