Harris Stratex Networks (HSTX): Wireless networking specialists

Until not so long ago, wireless communications was the wave of the future. Today, it is an inescapable necessity. One highly-regarded equipment provider was formed recently by the merger of two rivals. Now it is the largest independent supplier of wireless transmission systems in the world.

Harris Stratex Networks (NASDAQ: HSTX) makes wireless network products for mobile and fixed service providers and private networks. Specialties include microwave radios for access and trunking applications, Ethernet transmission systems and network management software. The firm serves mobile network operators, public safety agencies, utility and transportation companies, government agencies and broadcasters, in more than 135 countries. Harris Stratex was formed in January of this year, when Stratex Networks merged with Harris Corporation's (NYSE: HRS) Microwave Communication Division. Competitors include Alcatel-Lucent (NYSE: ALU), Motorola (NYSE: MOT), Nokia (NYSE: NOK), Nortel Networks (NYSE: NT) and Qualcomm (NASDAQ: QCOM).

The firm surprised the Street earlier in the month, when it reported Q2 EPS of 18 cents and revenues of $174.1 million. Analysts had been expecting 14 cents and $156 million. Management also guided FY08 EPS to $1.05-1.22 ($1.06 consensus) and FY08 revenues to $670-702 billion ($670.25M consensus). Ferris Baker Watts and Needham subsequently reiterated "buy" ratings on the issue.

The stock popped on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, brokers now recommend the shares with two "strong buys," three "buys" and one "hold." Analysts see a 28% growth rate, through the next year. The HSTX Price to Sales ratio (2.17), Price to Book ratio (1.46) and Sales Growth rate (57.56%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 38% of the outstanding shares. Over the past 52 weeks, the stock has traded between $14.85 and $21.25. A stop-loss of $16.50 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.