HRS Harris Corp.

A leading supplier of communications equipment and services, Harris Corp. (HRS) recently won a contract from an East African country for Falcon III and Falcon II tactical radios worth $11.7 million.

Harris will supply the Falcon III® RF-7800V Very-High Frequency (VHF) Combat Net Radios, which supports both voice and data communications (including line-of-sight or beyond line-of-sight locations). These tactical radios are very useful during wars as it offers high-resolution file sharing and wireless video streaming at a  speed of 192 Kbps within 30 to 108 MHZ frequency.

While the Falcon II® RF-5800H high-frequency (HF) radios offers important features like Third Generation-Automatic Link Establishment (3G-ALE) and integrated data link protocols. It also supports embedded GPS receivers.

Harris Corp.reported an excellent second quarter 2011 financial results with revenue increasing 18.1% year over year. Total orders generated during the quarter were $1.41 billion. In the ensuing third quarter of 2011, Harris has already won contracts worth more than $1 billion, thereby showing strong signs of growth. Moreover, the company will benefit from higher defense expenditure by the U.S. government coupled with acquisitions and new expansion drives in the Asian, European & African markets.

With huge cash availability, the company is focusing on inorganic growth. Recently, the company completed the acquisition of Global Connectivity Services (GCS) business from Schlumberger Ltd. It has also bought Carefx Corporation, a leading provider of interoperability workflow solutions. The acquisition of Carefx Corporation will give Harris a strong foothold in the commercial healthcare market. However, competition from companies like Boeing Co. (BA), General Dynamics Corp. (GD) and Raytheon Co. (RTN) is expected to put Harris on the back foot.

We thus maintain our long-term Neutral recommendation for Harris Corporation. Currently, Harris Corporation has a Zacks#3 Rank, implying a short-term Hold rating on the stock.

 
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