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Analyst Blog

Harris Corporation (HRS - Free Report) , a leader in the public safety and professional communications market, has received a $63 million contract that entails the company to provide enterprise messaging services to the Federal Aviation Administration (FAA).

The National Air Space Enterprise Messaging Service (NEMS) of Harris Corp will act as network-centric distribution technology for a variety of data. It includes flight planning, efficient traffic management, surface radar and weather updates. Further, the NEMS service will also allow enterprise data sharing that will facilitate next generation air transportation system. 

For some time now, Harris has been developing and integrating system solutions for the FAA in support of the National Airspace System (NAS). This is the third contract for the company in quick succession as the Melbourne, Florida-based Harris received two multi-million contracts from FAA in the last one month. 

We believe the contract will strengthen its Government Communication Systems order book as the company continues to benefit from FAA’s initiative to modernize the U.S. air traffic control system with a next generation communication network. The company is expected to win many such contracts as it has been selected as a prime contractor for FAA Telecom infrastructure (FTI) initiative of National Airspace System (NAS).

However, despite winning consistent contracts and a strong order book, Harris faces stiff competition from companies like Boeing Co. (BA - Free Report) , General Dynamics Corp. (GD - Free Report) and Raytheon Co. (RTN - Free Report) , which also provide high-end public safety communication systems.

Recently, Harris declared better-than-expected fiscal fourth-quarter 2012 financial results with Earnings per Share meeting the Zacks Consensus Estimate. In the reported quarter, Government Communication System segment revenue dipped 0.5% year over year to $497.2 million.

We are maintaining our long-term Neutral recommendation on Harris Corporation. The company also retains a Zacks #3 Rank, implying a short-term Hold rating.