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L3Harris Technologies (LHX) Beats on Q2 Earnings, Tweaks View
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L3Harris Technologies, Inc.’s (LHX - Free Report) second-quarter 2020 adjusted earnings came in at $2.83 per share, which surpassed the Zacks Consensus Estimate of $2.62 by 8%. The bottom line also increased 13% from the year-ago quarter’s $2.51.
Including one-time items, the company reported GAAP earnings of $1.30 per share compared with $2.21 in the year-ago quarter.
The year-over-year downside in GAAP earnings can be attributed to divestiture-related charges, COVID-19-related impacts and amortization of merger-related intangibles.
Total Revenues
In the quarter under review, the company’s revenues came in at $4,445 million, lagging the Zacks Consensus Estimate of $4,460 million by 0.4%. However, revenues surged 138% on a year-over-year basis, driven by post-merger inclusion of L3 operations.
L3Harris Technologies Inc Price, Consensus and EPS Surprise
Integrated Mission Systems: Net sales at the segment came in at $1,331 million. On a pro forma basis, revenues were up 7.3%,driven by growth in Electro Optical and Maritime units.
Operating income, on a pro-forma basis, came in at $224 million compared with $162 million in the year-ago quarter. Moreover, operating margin expanded 370 basis points (bps) to 16.8%.
Space and Airborne Systems: The segment recorded net sales of $1,249 million in the second quarter, up 23% year over year. On a pro-forma basis, revenues increased 4.1% year over year driven by a ramp up in modernization on the F-35 platform in Avionics and classified growth in Intel and Cyber.
Operating income increased to $235 million from $228 million in the year-ago quarter. Operating margin contracted 20 bps to 18.8%.
Communication Systems: Net sales at the segment rose 83% to $1,112 million. On a pro- forma basis, revenues increased 2.4% year over year due to ramp up in U.S. DoD modernization programs in Tactical Communications and Integrated Vision Systems.
Operating income increased to $265 million from $239 million in the year-ago quarter. Operating margin expanded 180 bps to 23.8%.
Aviation Systems: Net sales at the segment came in at $800 million, down 17% on a pro-forma basis, on account of COVID-19-related impacts in the commercial aviation business.
Operating income decreased to $31 million from $109 million. Operating margin contracted a huge 740 bps to 3.9%.
Financial Position
As of Jul 3, 2020, L3Harris had $1,947 million in cash and cash equivalents compared with $824 million as of Jan 3, 2020.
Long-term debt as of Jul 3, 2020 was $6,273 million compared with $6,694 million as of Jan 3, 2020.
Net cash inflow from operating activities amounted to $1,335 million at the end of second-quarter 2020 compared with the year-ago cash inflow of $716 million.
2020 View
L3Harris made some changes to its 2020 guidance. The company continues to expect organic revenues to grow in the range of 3-5% and projects revenues in the range of $18.2-$18.6 billion. The Zacks Consensus Estimate for revenues of $18.6 billion is in line with the higher end of the company provided range.
Adjusted earnings per share for 2020 arestill projected in the range of $11.15-$11.55. The Zacks Consensus Estimate for earningsof $11.28 lies below the midpoint of the company’s guidance.
However, the company has decreased its GAAP EPS guidance to the range of $6.03-$6.43 from the previous guidance of $6.95-$7.35.
Operating cash flow and adjusted free cash flow are still expected in the range of $2.8-$2.9 billion and $2.6-$2.7 billion, respectively.
Teledyne Technologies (TDY - Free Report) reported second-quarter 2020 adjusted earnings of $2.43 per share, which surpassed the Zacks Consensus Estimate of $2.01 by 20.9%.
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%.
Hexcel Corporation (HXL - Free Report) reported second-quarter 2020 adjusted earnings of 8 cents per share, which missed the Zacks Consensus Estimate of 20 cents by 60%.
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L3Harris Technologies (LHX) Beats on Q2 Earnings, Tweaks View
L3Harris Technologies, Inc.’s (LHX - Free Report) second-quarter 2020 adjusted earnings came in at $2.83 per share, which surpassed the Zacks Consensus Estimate of $2.62 by 8%. The bottom line also increased 13% from the year-ago quarter’s $2.51.
Including one-time items, the company reported GAAP earnings of $1.30 per share compared with $2.21 in the year-ago quarter.
The year-over-year downside in GAAP earnings can be attributed to divestiture-related charges, COVID-19-related impacts and amortization of merger-related intangibles.
Total Revenues
In the quarter under review, the company’s revenues came in at $4,445 million, lagging the Zacks Consensus Estimate of $4,460 million by 0.4%. However, revenues surged 138% on a year-over-year basis, driven by post-merger inclusion of L3 operations.
L3Harris Technologies Inc Price, Consensus and EPS Surprise
L3Harris Technologies Inc price-consensus-eps-surprise-chart | L3Harris Technologies Inc Quote
Segmental Performance
Integrated Mission Systems: Net sales at the segment came in at $1,331 million. On a pro forma basis, revenues were up 7.3%,driven by growth in Electro Optical and Maritime units.
Operating income, on a pro-forma basis, came in at $224 million compared with $162 million in the year-ago quarter. Moreover, operating margin expanded 370 basis points (bps) to 16.8%.
Space and Airborne Systems: The segment recorded net sales of $1,249 million in the second quarter, up 23% year over year. On a pro-forma basis, revenues increased 4.1% year over year driven by a ramp up in modernization on the F-35 platform in Avionics and classified growth in Intel and Cyber.
Operating income increased to $235 million from $228 million in the year-ago quarter. Operating margin contracted 20 bps to 18.8%.
Communication Systems: Net sales at the segment rose 83% to $1,112 million. On a pro- forma basis, revenues increased 2.4% year over year due to ramp up in U.S. DoD modernization programs in Tactical Communications and Integrated Vision Systems.
Operating income increased to $265 million from $239 million in the year-ago quarter. Operating margin expanded 180 bps to 23.8%.
Aviation Systems: Net sales at the segment came in at $800 million, down 17% on a pro-forma basis, on account of COVID-19-related impacts in the commercial aviation business.
Operating income decreased to $31 million from $109 million. Operating margin contracted a huge 740 bps to 3.9%.
Financial Position
As of Jul 3, 2020, L3Harris had $1,947 million in cash and cash equivalents compared with $824 million as of Jan 3, 2020.
Long-term debt as of Jul 3, 2020 was $6,273 million compared with $6,694 million as of Jan 3, 2020.
Net cash inflow from operating activities amounted to $1,335 million at the end of second-quarter 2020 compared with the year-ago cash inflow of $716 million.
2020 View
L3Harris made some changes to its 2020 guidance. The company continues to expect organic revenues to grow in the range of 3-5% and projects revenues in the range of $18.2-$18.6 billion. The Zacks Consensus Estimate for revenues of $18.6 billion is in line with the higher end of the company provided range.
Adjusted earnings per share for 2020 arestill projected in the range of $11.15-$11.55. The Zacks Consensus Estimate for earningsof $11.28 lies below the midpoint of the company’s guidance.
However, the company has decreased its GAAP EPS guidance to the range of $6.03-$6.43 from the previous guidance of $6.95-$7.35.
Operating cash flow and adjusted free cash flow are still expected in the range of $2.8-$2.9 billion and $2.6-$2.7 billion, respectively.
Zacks Rank
L3Harris currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Defense Releases
Teledyne Technologies (TDY - Free Report) reported second-quarter 2020 adjusted earnings of $2.43 per share, which surpassed the Zacks Consensus Estimate of $2.01 by 20.9%.
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%.
Hexcel Corporation (HXL - Free Report) reported second-quarter 2020 adjusted earnings of 8 cents per share, which missed the Zacks Consensus Estimate of 20 cents by 60%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>