Harris Corporation Stock Downgraded (HRS)

NEW YORK (TheStreet) -- Harris Corporation (NYSE:HRS) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and generally poor debt management.

Highlights from the ratings report include:

• HRS's revenue growth trails the industry average of 15.3%. Since the same quarter one year prior, revenues slightly increased by 4.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
• Net operating cash flow has increased to $205.20 million or 22.50% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.18%.
• HARRIS CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HARRIS CORP increased its bottom line by earning $4.65 versus $4.28 in the prior year. This year, the market expects an improvement in earnings ($5.19 versus $4.65).
• Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Communications Equipment industry and the overall market, HARRIS CORP's return on equity is below that of both the industry average and the S&P 500.
• The share price of HARRIS CORP has not done very well: it is down 20.87% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

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Harris Corporation, together with its subsidiaries, operates as a communications and information technology company that serves government and commercial markets worldwide. It operates in three segments: RF Communications, Integrated Network Solutions, and Government Communications Systems. The company has a P/E ratio of 18.7, below the average telecommunications industry P/E ratio of 533.9 and above the S&P 500 P/E ratio of 17.7. Harris has a market cap of $4.86 billion and is part of the technology sector and telecommunications industry. Shares are up 16.3% year to date as of the close of trading on Friday.

You can view the full Harris Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet Ratings Staff

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