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L3Harris Technologies, Inc.’s (LHX - Free Report) first-quarter 2020 adjusted earnings came in at $2.80 per share, which surpassed the Zacks Consensus Estimate of $2.61 by 7.3%. The bottom line also increased 20.7% from the year-ago quarter’s $2.32.
Including one-time items, the company reported GAAP earnings of 99 cents per share compared with $1.75 in the year-ago quarter.
The year-over-year downside can be attributed to an impairment of goodwill and other assets and other COVID-19 related charges, amortization of merger intangibles and a less favorable program mix.
Total Revenues
In the quarter under review, the company’s revenues came in at $4,626 million, exceeding the Zacks Consensus Estimate of $4,590 million by 0.8%. Revenues surged 168% on a year over year basis, driven by post-merger inclusion of L3 operations.
L3Harris Technologies Inc Price, Consensus and EPS Surprise
Integrated Mission Systems: Net sales at the segment came in at $1,370 million. On a pro forma basis, revenues were up 1% on growth in Maritime.
Operating income came in at $201 million compared with $165 million in the year-ago quarter. Moreover, operating margin expanded 260 basis points (bps) to 14.7%.
Space and Airborne Systems: The segment recorded net sales of $1,192 million in the first quarter, up 25% year over year. On a pro-forma basis, revenues increased 7% year over year driven by a ramp up in modernization on the F-35 platform in Avionics and classified growth in Intel and Cyber.
Operating income increased to $221 million from $198 million in the year-ago quarter. Operating margin contracted 70 bps to 18.5%.
Communication Systems: Net sales at the segment rose 89% to $1,094 million.On a pro- forma basis, revenues increased 5% year over year due to ramp up in U.S. DoD modernization programs in Tactical Communications.
Operating income increased to $250 million from $226 million in the year-ago quarter. Operating margin expanded 120 bps to 22.9%.
Aviation Systems: Net sales at the segment came in at $1,011 million, up 11% on a pro-forma basis, driven by Defense Aviation Products and Mission Networks.
Operating income increased to $147million from $105 million. Operating margin expanded 300 bps to 14.5%.
Financial Position
As of Apr 3, 2020, L3Harris had $663 million in cash and cash equivalents compared with $824 million as of Jan 3, 2020.
Long-term debt as of Apr 3, 2020 was $6,294 million compared with $6,694 million as of Jan 3, 2020.
Net cash inflow from operating activities amounted to $533 million at the end of first-quarter 2020 compared with the year-ago cash inflow of $405 million.
2020 View
Considering the impacts of the COVID-19 pandemic, L3Harris made some changes to its 2020 guidance. The company now expects organic revenues to grow in the range of 3-5%, compared with the prior band of 5-7%.
The company currently projects revenues in the range of $18.3-$18.6 billion. The Zacks Consensus Estimate for revenues of $19.08 billion lies above the company provided guidance range.
Adjusted earnings per share for 2020 are now projected in the range of $11.15-$11.55, lower than the prior band of $11.35-$11.75. The Zacks Consensus Estimate for earningsof $11.07 lies below the guidance range. .
Operating cash flow and adjusted free cash flow are still expected in the range of $2.8-$2.9 billion and$2.6-$2.7 billion, respectively.
Teledyne Technologies Inc. (TDY - Free Report) reported first-quarter 2020 earnings of $2.28 per share, which surpassed the Zacks Consensus Estimate of $2.10 by 8.6%.
Lockheed Martin Corp. (LMT - Free Report) reported first-quarter 2020 earnings of $6.08 per share, which surpassed the Zacks Consensus Estimate of $5.76 by 5.5%.
Hexcel Corporation (HXL - Free Report) reported first-quarter 2020 adjusted earnings of 64 cents per share, which missed the Zacks Consensus Estimate of 67 cents by 4.5%.
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L3Harris Technologies (LHX) Q1 Earnings Beat, EPS View Cut
L3Harris Technologies, Inc.’s (LHX - Free Report) first-quarter 2020 adjusted earnings came in at $2.80 per share, which surpassed the Zacks Consensus Estimate of $2.61 by 7.3%. The bottom line also increased 20.7% from the year-ago quarter’s $2.32.
Including one-time items, the company reported GAAP earnings of 99 cents per share compared with $1.75 in the year-ago quarter.
The year-over-year downside can be attributed to an impairment of goodwill and other assets and other COVID-19 related charges, amortization of merger intangibles and a less favorable program mix.
Total Revenues
In the quarter under review, the company’s revenues came in at $4,626 million, exceeding the Zacks Consensus Estimate of $4,590 million by 0.8%. Revenues surged 168% on a year over year basis, driven by post-merger inclusion of L3 operations.
L3Harris Technologies Inc Price, Consensus and EPS Surprise
L3Harris Technologies Inc price-consensus-eps-surprise-chart | L3Harris Technologies Inc Quote
Segmental Performance
Integrated Mission Systems: Net sales at the segment came in at $1,370 million. On a pro forma basis, revenues were up 1% on growth in Maritime.
Operating income came in at $201 million compared with $165 million in the year-ago quarter. Moreover, operating margin expanded 260 basis points (bps) to 14.7%.
Space and Airborne Systems: The segment recorded net sales of $1,192 million in the first quarter, up 25% year over year. On a pro-forma basis, revenues increased 7% year over year driven by a ramp up in modernization on the F-35 platform in Avionics and classified growth in Intel and Cyber.
Operating income increased to $221 million from $198 million in the year-ago quarter. Operating margin contracted 70 bps to 18.5%.
Communication Systems: Net sales at the segment rose 89% to $1,094 million.On a pro- forma basis, revenues increased 5% year over year due to ramp up in U.S. DoD modernization programs in Tactical Communications.
Operating income increased to $250 million from $226 million in the year-ago quarter. Operating margin expanded 120 bps to 22.9%.
Aviation Systems: Net sales at the segment came in at $1,011 million, up 11% on a pro-forma basis, driven by Defense Aviation Products and Mission Networks.
Operating income increased to $147million from $105 million. Operating margin expanded 300 bps to 14.5%.
Financial Position
As of Apr 3, 2020, L3Harris had $663 million in cash and cash equivalents compared with $824 million as of Jan 3, 2020.
Long-term debt as of Apr 3, 2020 was $6,294 million compared with $6,694 million as of Jan 3, 2020.
Net cash inflow from operating activities amounted to $533 million at the end of first-quarter 2020 compared with the year-ago cash inflow of $405 million.
2020 View
Considering the impacts of the COVID-19 pandemic, L3Harris made some changes to its 2020 guidance. The company now expects organic revenues to grow in the range of 3-5%, compared with the prior band of 5-7%.
The company currently projects revenues in the range of $18.3-$18.6 billion. The Zacks Consensus Estimate for revenues of $19.08 billion lies above the company provided guidance range.
Adjusted earnings per share for 2020 are now projected in the range of $11.15-$11.55, lower than the prior band of $11.35-$11.75. The Zacks Consensus Estimate for earningsof $11.07 lies below the guidance range. .
Operating cash flow and adjusted free cash flow are still expected in the range of $2.8-$2.9 billion and$2.6-$2.7 billion, respectively.
Zacks Rank
L3Harris currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Defense Releases
Teledyne Technologies Inc. (TDY - Free Report) reported first-quarter 2020 earnings of $2.28 per share, which surpassed the Zacks Consensus Estimate of $2.10 by 8.6%.
Lockheed Martin Corp. (LMT - Free Report) reported first-quarter 2020 earnings of $6.08 per share, which surpassed the Zacks Consensus Estimate of $5.76 by 5.5%.
Hexcel Corporation (HXL - Free Report) reported first-quarter 2020 adjusted earnings of 64 cents per share, which missed the Zacks Consensus Estimate of 67 cents by 4.5%.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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