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Harris (HRS) Up 3.1% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Harris Corporation . Shares have added about 3.1% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Harris Beats on Q3 Earnings & Sales, View Adjusted

Harris Corporation reported third-quarter fiscal 2017 earnings (on an adjusted basis) of $1.38 per share, which beat the Zacks Consensus Estimate by $0.07. Quarterly earnings declined 4.83% on a year-over-year basis.

 
Revenues in the third quarter came in at $1,489.0 million and also beat the Zacks Consensus Estimate of $1,467.2 million. However, the figure declined from the year-ago quarter.

Revenues in the third quarter came in at $1,489.0 million and also beat the Zacks Consensus Estimate of $1,467.2 million. However, the figure declined from the year-ago quarter.

Cost of product sales and services in the reported quarter was $964 million, compared with $1,009 million in the prior-year quarter. Engineering, selling & administrative expenses totaled $250 million in the quarter under review, as compared with $273 million in the third quarter of fiscal 2016.

Segmental Performance

Revenues at the Communication Systems segment came in at $461 million in the quarter, down 5%. Lower volumes hurt the results. Segmental operating income declined to $141 million due to lower volumes.

Revenues at the Space and Intelligence Systems unit were $475 million, down 2.86%. Results were hurt by lower revenues from environmental and space programs. Operating income for the segment was $76 million, up 1.33%.

Revenues at the Electronic Systems unit totaled $553 million, down 3.83%. Segmental operating income was $115 million, up 3.60%.

At the end of the reported quarter, the company had cash and cash equivalents of $302 million, compared with $487 million at the end of fiscal 2016. Total long-term debt at the end of fiscal third quarter was $3,859 million, compared with $4,120 million at the end of fiscal 2016.

 
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Revenues in the third quarter came in at $1,489.0 million and also beat the Zacks Consensus Estimate of $1,467.2 million. However, the figure declined from the year-ago quarter.
Cost of product sales and services in the reported quarter was $964 million, compared with $1,009 million in the prior-year quarter. Engineering, selling & administrative expenses totaled $250 million in the quarter under review, as compared with $273 million in the third quarter of fiscal 2016.
 
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The company now expects earnings per share (on an adjusted basis) for fiscal 2017 in the band of $5.50 to $5.55 (old guidance: $5.40 to $5.60).

The company expects fiscal 2017 revenue (on an organic basis) to decline of 1% year over year, as compared to the previous guidance of flat to down 2%, excluding $60 million of prior-year revenues from the divested Aerostructures business.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

Harris Corporation Price and Consensus

 

VGM Scores

At this time, the stock has a poor Growth Score of 'F', however its Momentum is doing a bit better with a 'D'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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