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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 2021 results on Aug 3, before the opening bell.

Solid cost synergies and operational excellence as a result of the merger are likely to have boosted the company’s earnings performance. Moreover, the company’s four-quarter average earnings surprise is 5.90%.

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

Segmental Performance

Solid growth observed in the sale of F-35 jets has been boosting the company’s Space and Airborne Systems unit’s growth for the past few quarters, a trend we expect to have bolstered its second-quarter performance as well.

The Zacks Consensus Estimate for Space and Airborne Systems unit’s second-quarter revenues, pegged at $1.31 billion, indicates an increase of 4.6% from the year-ago quarter’s reported figure.

L3Harris Technologies Inc Price and EPS Surprise

L3Harris Technologies Inc Price and EPS Surprise

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

Consistent modernization demand for DoD tactical and integrated vision systems is expected to have once again boosted revenues of the company’s Communication Systems segment. However, lower volume from legacy unmanned platforms within broadband due to the transition from permissive to contested operating environments has been hurting this unit.

The Zacks Consensus Estimate for Communication Systems unit’s second-quarter revenues, pegged at $845 million, indicates a deterioration of 24% from the year-ago quarter’s reported figure.

Moreover, impacts of the pandemic have been consistently hurting the commercial aerospace, amid a slow recovery observed lately. Considering this trend to have prevailed in the second quarter as well, we remain skeptical about the performance of the company’s Aviation Systems segment. Nevertheless, ramped up production of manned platforms is expected to have boosted the revenue performance of its Integrated Mission Systems unit.

Overall, the Zacks Consensus Estimate for L3Harris’ second-quarter revenues, pegged at $4.64 billion, indicates a rise of 4.4% from the year-ago quarter’s reported figure.

Earnings Prospects

Solid revenue growth prospects keep our hopes high for the company’s Q2 earnings performance. Moreover, the company has been witnessing significant cost synergies, primarily attributable to supply chain and facilities consolidation as a result of the merger between legacy L3 Technologies and Harris Corp. This must have boosted L3Harris’ second-quarter operating margin, thereby contributing favorably to the bottom-line figure. Moreover, L3Harrris’ aggressive cost management initiatives are also projected to have boosted quarterly earnings. Considering these factors, we remain optimistic about the company’s bottom-line performance in the yet-to-be-reported quarter.

The Zacks Consensus Estimate for L3Harris’ second-quarter earnings of $3.17 per share indicates growth of 12% from the year-ago quarter’s reported figure.

What the Zacks Model Unveils

Our proven model predicts 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

L3Harris has an Earnings ESP of +0.43% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks to Consider

Here are a couple of other defense companies you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases:

Leidos Holdings (LDOS - Free Report) has an Earnings ESP of +4.46% and a Zacks Rank #2.

Northrop Grumman (NOC - Free Report) has an Earnings ESP of +0.97% and a Zacks Rank #2.

A Recent Defense Release

Raytheon Technologies’ (RTX - Free Report) second-quarter 2021 adjusted earnings per share (EPS) of $1.23 outpaced the Zacks Consensus Estimate of 92 cents by 33.7%.

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