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Why Is L3Harris (LHX) Up 21.5% Since Last Earnings Report?
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It has been about a month since the last earnings report for L3Harris (LHX - Free Report) . Shares have added about 21.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is L3Harris due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
L3Harris Q4 Earnings Top Estimates, Revenues Fall Y/Y
L3Harris Technologies fourth-quarter 2021 adjusted earnings from continuing operations came in at $3.30 per share, which surpassed the Zacks Consensus Estimate of $3.25 by 1.5%. The bottom line also increased 5% from the year-ago quarter’s $3.14 per share.
Excluding one-time items, the company reported GAAP earnings of $2.46 per share compared with 92 cents in the year-ago quarter.
For 2021, earnings were $12.95 per share, up 12% from the year-ago quarter. Moreover, 2021 earnings exceeded the Zacks Consensus Estimate of $12.92 by 0.2%.
Total Revenues
In the quarter under review, the company’s revenues came in at $4,350 million, missing the Zacks Consensus Estimate of $4,467 million by 2.7%. Moreover, revenues declined 7% from the year-ago quarter’s $4,660 million.
Revenues in the reported quarter were primarily impacted by divestitures within Aviation Systems and supply chain-related constraints within Communication Systems.
In 2021, total revenues declined 2% year over year to $17,814 million. Full-year revenues, however, missed the Zacks Consensus Estimate of $17,920 million by 0.6%
Segmental Performance
Integrated Mission Systems: Net revenues in the segment came in at $1,558 million, up 6% year over year, driven by growth in aircraft missionization on a NATO program and in Electro Optical from higher product deliveries.
Operating income improved 24% year over year to $259 million while operating margin expanded 230 basis points (bps) to 16.6%.
Space and Airborne Systems: The segment recorded net revenues of $1,286 million in the fourth quarter, up 2% year over year. This upside was driven by a ramp-up in missile defense and other responsive programs.
Operating income decreased 4% to $235 million while operating margin contracted 120 bps to 18.3%.
Communication Systems: Net revenues in the segment declined 11% to $1,018 million on account of product delivery delays from supply chain-related constraints mainly within Tactical Communications, lower volume on legacy platforms in Broadband Communications, contract roll-offs in Global Communications Solutions, and delivery timing within Integrated Vision Solutions.
Operating income declined 15% to $253 million. Operating margin contracted 100 bps to 24.9%.
Aviation Systems: Net revenues declined 37% to $535 million, primarily due to divestitures. Also, lower revenues from contract roll-offs and delayed awards within Defense Aviation, as well as lower FAA volume in Mission Networks contributed to the poor top-line performance.
The segment reported an operating income of $77 million, down 39%. Operating margin contracted 50 bps to 14.4%.
Financial Position
As of Dec 31, 2021, L3Harris had $941 million in cash and cash equivalents compared with $1,276 million as of Jan 1, 2021.
Long-term debt as of Dec 31, 2021 was $7,048 million compared with $6,943 million as of Jan 1, 2021.
Net cash inflow from operating activities amounted to $2,2687 million at the end of 2021 compared with the year-ago cash inflow of $2,790 million.
2022 View
L3Harris currently expects to generate revenues of $17.5 billion in 2022. The Zacks Consensus Estimate for revenues, pegged at $18.18 billion, is higher than the guided figure.
Earnings in 2022 are expected to be in the range of $13.35-$13.65 per share. The Zacks Consensus Estimate for EPS, pegged at $13.50, is in line with the midpoint of the guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, L3Harris has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, L3Harris has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is L3Harris (LHX) Up 21.5% Since Last Earnings Report?
It has been about a month since the last earnings report for L3Harris (LHX - Free Report) . Shares have added about 21.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is L3Harris due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
L3Harris Q4 Earnings Top Estimates, Revenues Fall Y/Y
L3Harris Technologies fourth-quarter 2021 adjusted earnings from continuing operations came in at $3.30 per share, which surpassed the Zacks Consensus Estimate of $3.25 by 1.5%. The bottom line also increased 5% from the year-ago quarter’s $3.14 per share.
Excluding one-time items, the company reported GAAP earnings of $2.46 per share compared with 92 cents in the year-ago quarter.
For 2021, earnings were $12.95 per share, up 12% from the year-ago quarter. Moreover, 2021 earnings exceeded the Zacks Consensus Estimate of $12.92 by 0.2%.
Total Revenues
In the quarter under review, the company’s revenues came in at $4,350 million, missing the Zacks Consensus Estimate of $4,467 million by 2.7%. Moreover, revenues declined 7% from the year-ago quarter’s $4,660 million.
Revenues in the reported quarter were primarily impacted by divestitures within Aviation Systems and supply chain-related constraints within Communication Systems.
In 2021, total revenues declined 2% year over year to $17,814 million. Full-year revenues, however, missed the Zacks Consensus Estimate of $17,920 million by 0.6%
Segmental Performance
Integrated Mission Systems: Net revenues in the segment came in at $1,558 million, up 6% year over year, driven by growth in aircraft missionization on a NATO program and in Electro Optical from higher product deliveries.
Operating income improved 24% year over year to $259 million while operating margin expanded 230 basis points (bps) to 16.6%.
Space and Airborne Systems: The segment recorded net revenues of $1,286 million in the fourth quarter, up 2% year over year. This upside was driven by a ramp-up in missile defense and other responsive programs.
Operating income decreased 4% to $235 million while operating margin contracted 120 bps to 18.3%.
Communication Systems: Net revenues in the segment declined 11% to $1,018 million on account of product delivery delays from supply chain-related constraints mainly within Tactical Communications, lower volume on legacy platforms in Broadband Communications, contract roll-offs in Global Communications Solutions, and delivery timing within Integrated Vision Solutions.
Operating income declined 15% to $253 million. Operating margin contracted 100 bps to 24.9%.
Aviation Systems: Net revenues declined 37% to $535 million, primarily due to divestitures. Also, lower revenues from contract roll-offs and delayed awards within Defense Aviation, as well as lower FAA volume in Mission Networks contributed to the poor top-line performance.
The segment reported an operating income of $77 million, down 39%. Operating margin contracted 50 bps to 14.4%.
Financial Position
As of Dec 31, 2021, L3Harris had $941 million in cash and cash equivalents compared with $1,276 million as of Jan 1, 2021.
Long-term debt as of Dec 31, 2021 was $7,048 million compared with $6,943 million as of Jan 1, 2021.
Net cash inflow from operating activities amounted to $2,2687 million at the end of 2021 compared with the year-ago cash inflow of $2,790 million.
2022 View
L3Harris currently expects to generate revenues of $17.5 billion in 2022. The Zacks Consensus Estimate for revenues, pegged at $18.18 billion, is higher than the guided figure.
Earnings in 2022 are expected to be in the range of $13.35-$13.65 per share. The Zacks Consensus Estimate for EPS, pegged at $13.50, is in line with the midpoint of the guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, L3Harris has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, L3Harris has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.