Higher Costs, Forex Headwinds To Reflect In Harris' Q1

(RTTNews) - Telecommunications equipment maker Harris Corp. (HRS) is due to release its first-quarter results before the market open on Tuesday, November 3. Analysts polled by Thomson Reuters are estimating earnings of $1.31 per share on revenue of $1.85 billion.

Harris continues to increase its international footprint and invest aggressively in company-funded R&D to position the company for future growth. The company said it is on track to achieve annual run-rate savings of about $120 million as it exit fiscal 2017 — a year sooner than originally expected and at the high end of its earlier estimates.

Though revenues are likely to be boosted by Exelis acquisition, transaction-related costs and charges are expected to impact the company's earnings. Moreover, the company expects U.S. government budget constraints and headwinds to continue in fiscal 2016.

In the last quarter, the company incurred a net loss of $56.2 million or $0.51 per share, compared to net income of $131.4 million, or $1.22 per share in the prior year. Loss from continuing operations for the latest fourth quarter was $56.1 million, or $0.51 per share, compared to income of $137.6 million or $1.28 per share in the year-ago period.

Non-GAAP income from continuing operations for the latest fourth quarter was $148 million, or $1.32 per share, excluding acquisition-related costs and charges for restructuring and other items. The net benefit from the Exelis acquisition to Harris non-GAAP income from continuing operations was $0.09 per share.

Analysts polled by Thomson Reuters expected earnings of $1.21 per share for the quarter. Analysts' estimates typically exclude special items.

Orders in the fourth quarter were $1.53 billion compared with $1.09 billion in the prior year.

Quarterly revenue rose to $1.53 billion from $1.33 billion in the prior year, while 5 analysts had a consensus revenue estimate of $1.24 billion.

"Fourth quarter results were solid, and the integration of Harris and Exelis is off to a good start," said William Brown, chairman, president and chief executive officer. "We announced our reorganization into four market-focused segments for fiscal 2016 and we consolidated headquarters, combining the top talent from across both companies. We also announced our intention to close Exelis' Ft. Wayne tactical radio facility and consolidate operations into our world-class Rochester facility. These initial integration steps mark good progress towards achieving the significant cost savings and improved competitive position this combination affords us."

On May 29, 2015, Harris acquired Exelis Inc. for $4.7 billion — the company's largest acquisition to date. The transaction established Harris as a top 10 defense contractor with the scale, technology portfolio and agility to take on any size challenge. The acquisition creates a combined company with about $8 billion in annualized revenue, more than 22,000 dedicated employees, and strong core franchises.

Looking Ahead...

For fiscal 2016, the company expects GAAP earnings to be in the range of $5.25 - $5.45 per share, non-GAAP earnings, excluding integration and other acquisition-related charges, in the range of $5.60 - $5.80 per share. Analysts currently expect earnings of $5.72 per share versus prior estimation of $5.76 per share.

The company expects fiscal 2016 revenue to be in the range of $7.67 billion - $7.83 billion. Analysts now sees revenue of $7.73 billion versus their previous expectation of $7.98 billion.

Recent Happenings

Mid-September, Harris bagged $26 million in orders to provide Falcon III tactical radios to support special operations forces in a nation in Central Asia.

September 29, the company said it has been awarded a single-source IDIQ contract with a ceiling value of $390 million to supply a new specialized handheld tactical radio to U.S. Special Operations Forces (SOF). The IDIQ contract consists of a five-year base and an additional one-year option.

The contract will see Harris providing SQF its new integrated two-channel, handheld radio that combines communications and intelligence, surveillance and reconnaissance (ISR) capabilities to address the SOF's unique mission needs.