Harris Still in Neutral Zone - Analyst Blog
November 10 2011 - 12:45PM
Zacks
Harris Corp. (HRS) reported solid financial
results for the first quarter of fiscal 2012, mostly in line with
the Zacks Consensus Estimates. Nonetheless, 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.
While management remains confident that its consolidated
pipeline opportunity is still intact, we are not sure exactly when
these contracts are going to achieve fruition, given the ongoing
political instability in Asian and African regions and an extremely
slow pace of global economic recovery.
Meanwhile, in the previous quarter, Harris generated
significantly higher new orders, which indicates the company’s
superior product portfolio can sustain global economic headwinds.
Accretive share repurchase plan coupled with huge order backlogs
will act as positive catalysts for the stock going forward. We
therefore reiterate our Neutral recommendation on Harris.
Harris generated significantly higher orders in the first
quarter of fiscal 2012. Total order value was $1.62 billion, up 23%
year over year and up 4% sequentially. Book-to-bill ratio for the
whole company in the previous quarter remains greater than 1.0. We
believe new orders will help Harris to improve margins due to
favorable product-mix and its decision to shift tactical radio
operations to a new product facility in order to reduce costs.
Harris depends on U.S. Government contracts for a major part of
its revenue. In the future, Federal budgetary pressures may result
in deeper than expected cuts in defense spending, which may
significantly impact the company’s business prospects. Moreover,
the company competes intensely with The Boeing Co.
(BA), General Dynamics Corp. (GD) and
Raytheon Co. (RTN).
BOEING CO (BA): Free Stock Analysis Report
GENL DYNAMICS (GD): Free Stock Analysis Report
HARRIS CORP (HRS): Free Stock Analysis Report
RAYTHEON CO (RTN): Free Stock Analysis Report
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