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Harris (HRS) to Power F-35 With Next-Gen Computer Processor

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Harris Corporation recently secured a plum contract for an undisclosed amount to deliver next-generation Integrated Core Processor (ICP) for F-35 fighter jets. The deal, awarded by Lockheed Martin Corporation (LMT - Free Report) , aims to reduce production costs of the jets while improving its performance.

The F-35 is arguably the most lethal fighter jet with unique capabilities like radar evading stealth technology, enhanced weapons capacity and supersonic speed. In addition, it possesses a one-of-a-kind ability to collect, analyze and share data with advanced, integrated sensors for an all-pervasive defense mechanism. Data collected by F-35 sensors could be immediately shared with commanders at sea, in the air or on the ground, making it a formidable force multiplier while enhancing coordinated operations.  

The ICP acts as the brain of F-35 and enables it to process data for communications, sensors, electronic warfare, guidance and control, cockpit and helmet displays. It helps to integrate all other electronic systems previously managed by separate mission and weapons computers and dedicated signal processors. Furthermore, ICP provides the pilot with 360-degree situational awareness of threats and accordingly prioritize and recommend measures to negate them.

The Harris-built ICP is expected to be available in aircrafts that will begin deliveries in 2023. The next-generation ICP is likely to be 75% cheaper with 25x computing power to support planned capability enhancements. Moreover, continued R&D efforts have enabled Harris to promise greater software stability, higher reliability and increased diagnostics resulting in lower sustainment costs for the ICP. This, in turn, is likely to pave the way for system scalability in the long run as open systems emerge as the future of avionics.

Such coveted contract wins are expected to generate a steady revenue stream for the company and augment its position in the market. Harris has also offered a bullish guidance for fiscal 2019 owing to healthy growth dynamics and benefits from the new tax law. It expects revenues in the range of $6.53-$6.65 billion, up 6-8% from fiscal 2018. EPS from continuing operations is expected between $7.65 and $7.85.

Despite the positives, Harris has underperformed the industry in the past year with an average return of 26.9% compared with 29.6% gain for the latter. Whether the latest contract win can improve the stock performance in the future remains to be seen.


 

Harris currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Juniper Networks, Inc. (JNPR - Free Report) and QUALCOMM Incorporated (QCOM - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Juniper has a long-term earnings growth expectation of 5.7%. It delivered an average positive earnings surprise of 4.9% in the trailing four quarters.

Qualcomm has a long-term earnings growth expectation of 10.9%. It delivered an average positive earnings surprise of 19.8% in the trailing four quarters.

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