Harris Corp. (HRS) received a nine-year service contract from the Canadian government to service its fleet of CF-18 fighter jets. The deal is worth $270.3 million.
As per the contract, Harris will provide repair and overhaul, engineering support, program management, life cycle support and obsolescence and material management services to support the avionics systems on the jets.
It is a six-year contact with three additional option years, and will be in effect until the expected expiry of the jets life in 2020. The contract will create good job opportunities in Calgary and provide important avionics maintenance for the final years of flights for the CF-18.
Harris Canada Inc., a wholly-owned subsidiary, has been providing avionics support to the CF-18 jets for more than 11 years.
As a leading government electronics supplier, Harris is benefiting from the increase in U.S. defense expenditure. Harris has a strong market position in the government communications sector, with a broad product line and an enviable win rate on government contracts (over 60% historically).
Harris operates in a highly competitive communication equipment industry and faces intense competition from Boeing Co. (BA), General Dynamics Corp. (GD) and Raytheon Co. (RTN). Despite this, the company establishes itself as a global provider of communication equipment and services for government and commercial customers with a footprint in more than 150 countries.
However, Harris experiences a surge in demand for its tactical radio products, several government communications products and excellent operating efficiency.
We maintain our long-term Neutral recommendation for Harris. It is currently a short-term Zacks #3 Rank (Hold) stock.
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