Harris Corp. (HRS - Analyst Report) reported mixed financial results for the third quarter of fiscal 2013. GAAP net income from continuing operations was $124.6 million or $1.12 per share compared with a net income of $154.4 million or $1.38 per share in the year-ago quarter. Quarterly earnings per share of $1.12 were in line with the Zacks Consensus Estimate.
However, consolidated revenues in the reported quarter stood at $1,203.7 million, down 12.1% year over year, missing the Zacks Consensus Estimate of $1,209 million. Harris currently carries a Zacks Rank #4 (Sell).
Cost of sales in the reported quarter was $803.5 million against $879.8 million in the prior-year quarter. Gross margin was 33.2% compared with 35.7% in the prior-year quarter. Engineering, selling & administrative expenses were $202.5 million versus $242 million in the year-ago quarter. Quarterly operating margin was 16.4% compared with 18% in the year-ago quarter. The third quarter saw total new orders of $1.13 billion against $1.48 billion in the prior-year quarter.
In the first nine months of fiscal 2013, Harris generated $513.2 million in cash from operations compared with $483.2 million in the prior-year period. Free cash flow (cash flow from operations excluding capital expenditures) for the reported period was $388.3 million compared with $325.8 million in the year-ago period.
At the end of the reported quarter, Harris had cash and cash equivalents of $459 million compared with $356 million at the end of fiscal 2012. Total debt at the end of the third quarter was $1,576.1 million compared with $1,883.0 million at the end of fiscal 2012. The debt-to-capitalization ratio was 0.48 compared with 0.49 at the end of fiscal 2012.
Government Communications System Segment
Quarterly revenues for the segment fell 6% year over year to $442.4 million. Operating income in the quarter was $67.1 million versus $64.1 million in the prior-year quarter. Quarterly operating margin was 15.2%, remaining same year over year.
RF Communications Segment
Revenues in the quarter were $417.7 million, down 22.3% year over year. “Tactical Radio Communications” and “Public Safety and Professional Communications” contributed roughly 66% and 34%, respectively. Operating income was $116.1 million compared with $181.6 million in the year-ago quarter. Quarterly operating margin was 27.8% against 33.8% in the year-ago quarter.
In the reported quarter, the segment generated new orders worth $486 million, $297 million from the Tactical Radio Communications business and $189 million from the Public Safety and Professional Communications business. Total order backlog in the Tactical Radio Communications segment was $582 million and $619 million in Public Safety and Professional Communications.
Integrated Network Solutions
The segment generated revenues of $364.5 million, down 6.1% year over year. Operating income in the quarter was $30.3 million compared with $22.3 million in the year-ago quarter. Quarterly operating margin was 8.3% compared with 5.7% in the prior-year quarter.
For fiscal 2013, Harris expects earnings per share from continuing operations of $4.60-$4.70 compared with the prior guidance of $5.00-$5.20 while on a GAAP basis earnings per share from continuing operations are expected to be $3.95-$4.33.
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). Both General Dynamics and Boeing surpassed the Zacks Consensus Estimate in the most recent quarter but the net earnings of Motorola Solutions missed the Zacks Consensus Estimate.