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L3Harris (LHX) to Report Q2 Earnings: What's in the Cards?

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L3Harris Technologies, Inc. (LHX - Free Report) is scheduled to release second-quarter 2020 results on Jul 31, before the opening bell.

The company delivered earnings surprise of 7.28% in the last reported quarter. Moreover, the company’s four-quarter average earnings surprise was 6.24%.

Let’s take a detailed look at some factors that may have influenced the company’s performance in the second-quarter.

Factors at Play

Second-quarter 2020 marked the completion of one year of the combined company formed through the merger of L3 Technologies and Harris Corp. As integration of these two industry stalwarts has beengoing well ahead of plan, accretion from the combination is expected to have boosted L3Harris’ operational performance in the second quarter.  

In June 2020, the company unveiled its man-portable Iver4 580 unmanned undersea vehicle (UUV), which can be used to address a wide variety of customer missions, including survey; multi-domain intelligence, surveillance and reconnaissance; anti-submarine warfare; seabed warfare and mine warfare. We believe positive synergies from this innovation to have contributed to the company’s top line.

L3Harris Technologies Inc Price and EPS Surprise

L3Harris Technologies Inc Price and EPS Surprise

L3Harris Technologies Inc price-eps-surprise | L3Harris Technologies Inc Quote

Further, revenues recognized from earlier defense contracts are also likely to have contributed to the company’s top line in the soon-to-be-reported quarter.   

The Zacks Consensus Estimate for L3Harris’ second-quarter revenues is pegged at $4.46 billion, indicating a massive 139.2% surgefrom the year-ago quarter reported figure.

Amid the COVID-19 pandemic situation, the company continues to make notable progress in integration procedure, which in turn has been reducing its overall cost structure. Particularly, improvements in overhead costs are boosting its margins. We expect L3Harris to have witnessed similar trends in the second quarter, which may have enhanced its bottom line growth.   

The Zacks Consensus Estimate for L3Harris’ second-quarter earnings of $2.62 per share indicates growth of 7.4% from the year-ago quarter reported figure.

However, given the impact of the pandemic on commercial aerospace business, we may expect the company’s upcoming results to reflect poor performance of the commercial business.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for L3Harris this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

L3Harris has an Earnings ESP of -0.27% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some defense companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Curtiss-Wright Corp. (CW - Free Report) has an Earnings ESP of +13.62% and a Zacks Rank #3.

Leidos Holdings, Inc. (LDOS - Free Report) has an Earnings ESP of +0.11% and a Zacks Rank #3.

A Recent Defense Release

Lockheed Martin (LMT - Free Report) reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%.. You can see the complete list of today’s Zacks #1 Rank stocks here.

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