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Is a Beat in the Cards for Harris (HRS) in Q1 Earnings?

Harris Corporation HRS is slated to release first-quarter fiscal 2018 results on Oct 31, before the market opens.

In the last quarter, the company posted in-line earnings per share. Notably, Harris Corporation has surpassed the Zacks Consensus Estimate for earnings in three of the last four quarters, with an average beat of approximately 3%.

The scenario appears to be rosy for Harris Corporation in the first quarter of fiscal 2018 as well. Its strong product portfolio is likely to boost results. In fact, the positive sentiment surrounding this Melbourne, FL- based company ahead of its earnings release can be gauged from the fact that the stock has witnessed the Zacks Consensus Estimate for the fiscal first-quarter earnings being revised 1.5% upward over the last 60 days.

Also, the stock has moved north in the last six months outperforming the Zacks Wireless- Equipment industry in the period. Shares of Harris rallied 21.4%, as against the industry’s loss of 3%. The possibility of greater military spending by the United States, owing to tensions with North Korea has boosted the stock.

Lets delve deep to find out the factors likely to have a bearing on Harris Corporation’s fiscal first-quarter results.

We expect the company’s Communication Systems unit to perform well in the to-be-reported quarter. Increased sales of legacy international tactical radios and operational efficiencies should buoy segmental results.

The Electronic Systems unit is also anticipated to perform well driven by the strength in strength in electronic warfare, among others.  Of late, the company has also won multiple contracts, which is likely to boost the top line further in the quarter.

Additionally, Harris Corporation announced a 8% dividend hike in the fiscal first quarter. We believe that the dividend hike not only indicates the company's commitment to create value for shareholders but also underlines its confidence regarding growth.

Markedly, the company’s efforts to reduce its debt levels also raise optimism in the stock. We expect an update on the issue on the fiscal first-quarter conference call.

On the flip side, the company’s Space and Intelligence Systems unit is anticipated to perform poorly in the quarter. Lower revenues from environmental and space programs might weigh on the segmental results as well.

What Does Our Model Say?

Our proven model too shows that Harris Corporation is likely to beat earnings in the soon-be-reported quarter because it has the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase its odds of an earnings surprise.

Zacks ESP: Harris Corporation has an Earnings ESP of +0.50% as the Most Accurate estimate is pegged at a penny above the Zacks Consensus Estimate of $1.36 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Harris Corporation carries a Zacks Rank #2 (Buy), which when combined with a positive ESP, makes us confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell-rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Harris Corporation is not the only company in the broader Computer and Technology sector that islooking up this earnings season. Here are some companies from the same space, which according to our model also have the right combination of elements to post earnings beat this quarter:

AMTEK, Inc. AME has an Earnings ESP of +0.18% and carries a Zacks Rank of 3. The company will report third-quarter earnings numbers on Nov 2.

Arrow Electronics, Inc. ARW has an Earnings ESP of +1.05% and holds a Zacks Rank #2. The company will also report third-quarter earnings numbers on Nov 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SBA Communications SBAC has an Earnings ESP of +12.00% and carries a Zacks Rank #3. The company will also report third-quarter earnings numbers on Oct 30.

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