Fitch Ratings upgraded the long-term issuer default ratings of Harris Corp. to BBB from BBB-, while maintaining its stable outlook.

Harris Corp.'s rating upgrade reflects Fitch's expectation of an improvement in the company's leverage profile after the repayment of $500 million in senior unsecured notes in April 2018.

The rating agency also expects Harris Corp.'s operating margins and free cash flow generation to improve as its revenues grow by low- to mid-single digits in 2018.

Fitch believes that expected improvements in debt reduction and operating results would enhance the company's credit profile by the end of the year.

Moreover, the rating agency expects that Harris Corp. will deal with underfunded pension liabilities by using free cash flow to take advantage of new tax laws. Fitch believes that move is a credit positive which would lead to a notable reduction in the company's pension liabilities.

While Fitch projects the free cash flow for 2018 to lie in the range of $300 million to $350 million owing to the expected discretionary pension contribution worth $300 million, it expects free cash flow to exceed $700 million each year starting from fiscal 2019.

In addition, the rating agency expects the company's funds from operations adjusted leverage to improve to 2.7x by the end of 2019, buoyed by the absence of required pension contributions after contributions worth $587 million in 2017 and projected contribution of $300 million in the first quarter of 2018.