L3Harris Technologies [LHX] last Friday reported strong earnings in its first quarter due to gains across its business segments and fewer impairment charges related to the COVID-19 pandemic although sales remained relatively flat.
Net income increased 140 percent to $466 million, $2.25 earnings per share (EPS), from $194 million (99 cents EPS) a year ago. Adjusted earnings, which exclude impacts from COVID and the divestiture of the former aviation security business, were up 7 percent to $862 million ($3.18 EPS), 22 cents per share higher than consensus estimates.
Sales were down a percent to just under $4.6 billion from just over $4.6 billion a year ago due to the divestiture and COVID impacts. Excluding the divestiture, organic revenue was up 2 percent.
All four of L3Harris’ operating segments contributed to the bottom-line gains with a swing to profit in the Aviation Systems segment the primary driver due to lack of large COVID-related goodwill impairment charges suffered a year ago. Still, even within Aviation, L3Harris said operational excellence, cost management and integration benefits contributed to the profit improvement.
In addition to the operational improvements across the segments, cost savings synergies, a lower share count and a pension tailwind also boosted the bottom-line.
Aviation led the downturn in sales due to the divestiture and COVID impacts on commercial business, while gains at Integrated Mission Systems, Space and Airborne Systems, and Communication Systems partially offset the lower revenue at Aviation.
Operational improvements led L3Harris to increase the low end of its earnings outlook for 2021 by a dime to between $12.70 to $13 in adjusted EPS.
Free cash flow in the quarter was $630 million and the outlook for cash is unchanged at between $2.8 billion and $2.9 billion.
Orders in the quarter topped $5 billion and backlog topped $21 billion, about even with the end of 2020.