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L3Harris (LHX) to Report Q1 Earnings: What's in the Cards?

L3Harris Technologies, Inc. LHX is scheduled to release first-quarter 2021 results on Apr 30, before the opening bell.

The company delivered an earnings surprise of 2.28% in the last reported quarter. Moreover, the company’s four-quarter average earnings surprise was 5.50%.

Let’s take a detailed look at some factors that may have influenced the company’s performance in the first quarter.

Segmental Performance

Production ramp up of the F-35 jets has been boosting the company’s Space and Airborne Systems unit’s growth for the past couple of quarters, a trend we expect to have bolstered first-quarter performance as well. Moreover, during its fourth-quarter earnings call, L3Harris identified this segment to be a key a growth driver for 2021, driven by a handful of significant contracts it secured in the recent past. Hence, we remain optimistic about this unit’s top line performance.

The Zacks Consensus Estimate for Space and Airborne Systems unit’s first-quarter revenues, pegged at $1.25 billion indicates an increase of 5.2% from the year-ago quarter’s reported figure.

L3Harris Technologies Inc Price and EPS Surprise

L3Harris Technologies Inc price-eps-surprise | L3Harris Technologies Inc Quote

On the other hand, consistent modernization demand for DoD tactical and integrated vision systems is expected to have once again boosted revenues for the company’s Communication Systems segment. Moreover, solid international sales growth, particularly from Middle East and Central Asia, might have also contributed favorably to this unit’s revenue growth in the soon-to-be-reported quarter.

The Zacks Consensus Estimate for Communication Systems unit’s first-quarter revenues, pegged at $1.13 billion indicates an increase of 3.3% from the year-ago quarter’s reported figure.

Meanwhile, increasing demand for ISR aircraft missionization along with recent contract wins for its maritime programs is likely to have boosted the company’s Integrated Mission Systems revenues. However, impacts of the pandemic is still hurting the commercial aerospace, although a slow recovery has been observed lately. So, we remain skeptical about the quarterly performance of the company’s Aviation Systems.

Overall, the Zacks Consensus Estimate for L3Harris’ first-quarter revenues, pegged at $4.55 billion, indicates a decline of 1.5% from the year-ago quarter’s reported figure.

Earnings Prospects

Although the company’s revenue growth prospects seem to be lackluster, projections for earnings remain impressive. Notably, synergies from the merger between L3 Technologies and Harris Corp. is expected to have boosted L3Harris’ first-quarter earnings.

Also operational excellence achieved through the merger have been bolstering operating margin of the combined company, a trend we expect to have benefited the first-quarter bottom- line figure. Moreover, L3Harrris’ aggressive cost management initiatives are also projected to have boosted quarterly earnings. Considering these factors, we remain optimistic about the company’s bottom-line performance in the yet-to-be-reported quarter.

The Zacks Consensus Estimate for L3Harris’ first-quarter earnings of $2.92 per share indicates growth of 4.3% from the year-ago quarter’s reported figure.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for L3Harris this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat but this is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

L3Harris has an Earnings ESP of -2.58% and a Zacks Rank #4 (Sell).

Stocks to Consider

Here are some defense companies you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases:

Moog Inc MOG.A has an Earnings ESP of +8.41% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Triumph Group TGI has an Earnings ESP of +9.80% and a Zacks Rank #3.

A Recent Defense Release

Lockheed Martin LMT reported first-quarter 2021 earnings of $6.56 per share, which surpassed the Zacks Consensus Estimate of $6.32 by 3.8%. The bottom line also improved 7.9% from the year-ago quarter’s $6.08.

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L3Harris Technologies Inc (LHX): Free Stock Analysis Report
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