A High-Tech Play On National Defense: HRS

Technology stocks are helping drive the stock market higher, a trend we recently discussed here. Whether it’s old-school companies like International Business Machines (IBM) or high-fliers like Google (GOOG) or Amazon (AMZN), tech has definitely been one of the rally’s leading catalysts. A handful of lesser-known stocks don’t get the attention they should.

One example of an under-the-radar quality tech issue is Harris Corp. (HRS). At its core, Florida-based Harris is an information technology company. Admittedly, this is a stodgy area in the tech world, but don’t let that deter you. There’s a lot to like with Harris. For instance, the U.S. government is one of the company’s biggest customers. Companies that rely on Uncle Sam for the bulk of their sales and profits, as does Harris, have predictable revenue streams. They’re often able to weather economic downturns more easily than other companies.

Harris designs and builds communications technology used by the U.S. military. Given that the U.S. is involved in two armed conflicts with no end in sight, demand should remain steady for the company’s products. Harris recently reported a 12% drop in fiscal first-quarter earnings, but sales climbed by almost three percent. That is significant. Unlike many companies that spent the better part of 2009 cutting costs, Harris is showing top-line growth.

More importantly, Harris offered robust full-year guidance. They expect to earn $3.85-$3.95 a share on sales of $5.1-$5.2 billion, topping previous estimates. The company landed a combined $286.5 million in new contracts from the State Department and U.S. Navy on the same day in late October. Two weeks before that, Harris acquired a $419 million contract from the U.S. Army. In August, Harris won a $10 million contract from the U.S. Air Force. The bottom line is that it is clear Uncle Sam is a big Harris customer, and that’s good news for Harris shareholders. I think they will deliver on the higher guidance.

Harris has more than $231 million in cash at the end of the most recent quarter and raised its quarterly dividend by 10% to 22 cents a share. This company is proving a tech company doesn’t need to do anything flashy to generate flashy returns. To go with a solid defense contractor in the hot tech sector, buy HRS.

Disclosure compliant with FTC 16 CFR Part 255 covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.