Harris Corp Earnings: Streak of Four Straight Quarters of Shrinking Margins Broken, but Profit Drops

S&P 500 (NYSE:SPY) component Harris Corporation (NYSE:HRS) reported its results for the second quarter. Harris Corporation is an international communications and information technology company serving commercial markets and government.

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Harris Earnings Cheat Sheet for the Second Quarter

Results: Net income for Harris Corporation fell to $133.1 million ($1.16 per share) vs. $151.1 million ($1.18 per share) a year earlier. This is a decline of 11.9% from the year earlier quarter.

Revenue: Rose 0.5% to $1.45 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: HRS reported adjusted net income of $1.22 per share. By that measure, the company beat the mean estimate of $1.18 per share. It fell short of the average revenue estimate of $1.51 billion.

Quoting Management: “Harris posted solid second quarter results with earnings per share in line with the prior year, despite orders and revenue being dampened by the constrained government spending environment,” said William M. Brown, president and chief executive officer. “The sequential increase in operating income for the company, driven by operating margin improvement in all of our segments, was encouraging. Cash flow from operations increased significantly compared to the previous quarter and the prior year, supporting expectations for strong cash flow again this year.”

Key Stats:

The company has now seen net income fall in each of the last four quarters. In the first quarter, net income fell 25.8% while the figure fell 11.8% in the fourth quarter of the last fiscal year and 16.1% in the third quarter of the last fiscal year.

The company has now topped analyst estimates for the last four quarters. It beat the mark by one cent in the first quarter, by one cent in the fourth quarter of the last fiscal year, and by one cent in the third quarter of the last fiscal year.

Revenue has risen the past four quarters. Revenue increased 3.9% to $1.46 billion in the first quarter. The figure rose 14.5% in the fourth quarter of the last fiscal year from the year earlier and climbed 6.3% in the third quarter of the last fiscal year from the year-ago quarter.

Gross margins expanded last quarter, rising 0.8 percentage point to 35.4% from the year earlier quarter. This snaps a streak of two consecutive quarters of shrinking margins.

Looking Forward: Analysts are pessimistic about the company’s results for the next quarter. The average estimate has fallen for the third quarter to $1.33 per share, down from $1.34 seven days ago. For the fiscal year, the average estimate has moved down from $5.12 a share to $5.11 over the last seven days.

Competitors to Watch: ViaSat, Inc. (NASDAQ:VSAT), EMS Technologies, Inc. (NASDAQ:ELMG), Motorola Solutions Inc (NYSE:MSI), Comtech Telecomm. Corp. (NASDAQ:CMTL), ITT Corporation (NYSE:ITT), Globecomm Systems, Inc. (NASDAQ:GCOM), SeaChange International (NASDAQ:SEAC), Avid Technology, Inc. (NASDAQ:AVID), Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC), and Technicolor S.A. (NYSE:TCH).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com