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Harris posts lower income, higher revenues; raises guidance

Harris Corp. reported lower net income for its second fiscal quarter because of a write-down of deferred tax assets, but the company's revenue increased 5.9% from a year earlier and it raised its guidance for fiscal year 2018 due to benefits from the new U.S. tax law and strong revenue growth.

The company reported net income of $139 million, or $1.15 per share, for its second fiscal quarter ending Dec. 29, 2017, down from $177 million, or $1.40 per share, in the year-ago quarter. The company said the decrease in GAAP EPS was primarily due to noncash charges in the quarter from a $52 million one-time write-down of deferred tax assets and an adjustment for deferred compensation.

Operating income, on a GAAP basis, decreased 1.8% year over year to $272 million from $277 million. Non-GAAP operating income decreased 2.1% to $284 million in the quarter from $290 million in the year-ago period.

Non-GAAP EPS increased to $1.67 from $1.38 in the prior-year quarter and was well above S&P Capital IQ's consensus normalized EPS estimate of $1.39. The company said non-GAAP EPS includes a benefit of 21 cents from the tax law and 8 cents from higher volume, operational improvements, higher pension income and a lower share count.

The company said revenue increased 5.9% year over year to $1.54 billion from $1.45 billion in the year-ago quarter as growth in communication systems and electronic systems revenues partially offset a decline in space and intelligent systems. Orders were up 12.6% to $1.39 billion for the quarter, compared with $1.23 billion in the prior-year period.

Communication systems revenue rose to $489 million from $413 million in the year-ago quarter, primarily due to a 56% increase in U.S. Department of Defense tactical revenue due to demand across all services and a 9% increase in international tactical revenue from strong growth in the Middle East. The segment's operating income increased to $144 million from $121 million because of higher volume and operational efficiencies.

Electronic systems revenue increased to $584 million from $570 million, but the segment's operating income decreased to $101 million in the quarter from $134 million in the prior-year period due to contract adjustments in mission networks, higher research and development expenses and an unfavorable mix that more than offset the strong performance on electronic warfare programs and higher volume in avionics.

Space and intelligence systems revenue declined to $465 million from $468 million due to slippage in environmental programs. The segment's operating income increased to $81 million from $76 million.

For the first half of fiscal 2018, the company reported net income of $300 million, or $2.47 per share, down from $337 million, or $2.68 per share, in the first half of the previous year.

The company raised its EPS guidance for fiscal year 2018 to a range of $5.78 to $5.98 and non-GAAP EPS outlook to a range of $6.30 to $6.50. Revenue is projected to increase by 3% to 4% from fiscal year 2017 to a range of $6.08 billion to $6.14 billion in 2018, compared with the previous guidance range of $6.02 billion to $6.14 billion.