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A month has gone by since the last earnings report for L3Harris (LHX). Shares have added about 3.8% in that time frame, underperforming 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 catalysts.
L3Harris Technologies Beats on Q2 Earnings, Tweaks View
L3Harris Technologies second-quarter 2020 adjusted earnings came in at $2.83 per share, which surpassed the Zacks Consensus Estimate of $2.62 by 8%. The bottom line also increased 13% from the year-ago quarter’s $2.51.
Including one-time items, the company reported GAAP earnings of $1.30 per share compared with $2.21 in the year-ago quarter.
The year-over-year downside in GAAP earnings can be attributed to divestiture-related charges, COVID-19-related impacts and amortization of merger-related intangibles.
Total Revenues
In the quarter under review, the company’s revenues came in at $4,445 million, lagging the Zacks Consensus Estimate of $4,460 million by 0.4%. However, revenues surged 138% on a year-over-year basis, driven by post-merger inclusion of L3 operations.
Segmental Performance
Integrated Mission Systems: Net sales at the segment came in at $1,331 million. On a pro forma basis, revenues were up 7.3%,driven by growth in Electro Optical and Maritime units.
Operating income, on a pro-forma basis, came in at $224 million compared with $162 million in the year-ago quarter. Moreover, operating margin expanded 370 basis points (bps) to 16.8%.
Space and Airborne Systems: The segment recorded net sales of $1,249 million in the second quarter, up 23% year over year. On a pro-forma basis, revenues increased 4.1% 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 $235 million from $228 million in the year-ago quarter. Operating margin contracted 20 bps to 18.8%.
Communication Systems: Net sales at the segment rose 83% to $1,112 million. On a pro- forma basis, revenues increased 2.4% year over year due to ramp up in U.S. DoD modernization programs in Tactical Communications and Integrated Vision Systems.
Operating income increased to $265 million from $239 million in the year-ago quarter. Operating margin expanded 180 bps to 23.8%.
Aviation Systems: Net sales at the segment came in at $800 milliondown 17% on a pro-forma basis, on account of COVID-19-related impacts in the commercial aviation business.