Harris Wins Contract for Falcon III - Analyst Blog
October 17 2011 - 4:00AM
Zacks
Harris Corp.
(HRS), a leading government communications equipments supplier, has
recently won a major contract from the U.S. Army to supply its
next-generation Falcon III AN/PRC-117G multiband manpack radios.
The U.S. Army will utilize Flacon III radios to modernize its
Brigade Combat Team’s tactical communications. Total order size is
of $66.3 million. Falcon III is the next generation of total
radios, which supports the U.S. military's Joint Tactical Radio
System (JTRS) requirements, as well as network-centric operations
worldwide.
We believe strong momentum in the
RF Communications segment of Harris will continue in future since
its next-generation Falcon III tactical radio is receiving
increasing market traction. At the end of fiscal 2011 (June 30,
2011), of Harris’ total order backlog for the tactical radio
communications was $766 million. Furthermore, tactical radios
constitute a huge $3.3 billion pipeline opportunity throughout the
world. So far, Harris shipped over 16,000 Falcon III AN/PRC-117G
radios to the U.S. Department of Defense and its allies.
Despite this, we believe the
company is facing several near-term concerns as the contraction of
the U.S. and international defense expenditures may act as a major
threat to Harris. Management has reduced its revenue guidance for
fiscal 2012 by $300 million in the last two consecutive quarters.
Through Harris remains confident that its consolidated pipeline
opportunity is still intact, it remains exposed to stiff
competition from its peers, such as Boeing Co.
(BA), General Dynamics Corp. (GD), and
Raytheon Co. (RTN).
Nevertheless, Harris decided to
boost its shareholders’ wealth through a new share repurchase
program and also raised its dividend rate. Several recent
acquisitions will also facilitate Harris to diversify its offerings
outside the defense sector.
We maintain our long-term Neutral
recommendation on Harris. Currently, it has a short-term Zacks #3
Rank (Hold) on the stock.
BOEING CO (BA): Free Stock Analysis Report
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HARRIS CORP (HRS): Free Stock Analysis Report
RAYTHEON CO (RTN): Free Stock Analysis Report
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