L3Harris Technologies, Inc. /De/ (LHX) Stock Analysis and Metrics

L3Harris Technologies

NYSE: LHX

$293.34 ▼ -2.06 (-0.70%)

At close: Jul 8, 2026 · 3:59 PM UTC

Financial Ratios

Market Cap54.60 Bn

P/E16.64

P/S1.41

Div. Yield0.02

ROIC (Qtr)0.00

Total Debt (Qtr)11.01 Bn

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About

L3Harris Technologies, Inc. provides integrated technology solutions for defense and civil government customers across space air land sea and cyber domains. The company designs manufactures and sustains communication systems mission systems space systems and propulsion products.

Revenue comes from the sale of communication equipment mission systems space platforms and propulsion systems to United States government agencies allied forces and commercial customers. The company also earns income from foreign military sales and commercial aviation services.

The company operates through the following segments: Communication Systems Integrated Mission Systems Space and Airborne Systems and Aerojet Rocketdyne.

• Communication Systems provides tactical radios software waveforms satellite terminals integrated vision solutions and public safety communication equipment for military and first responder customers.

• Integrated Mission Systems develops ISR platforms electronic attack systems autonomous vehicles and maritime sensor systems for naval and air platforms.

• Space and Airborne Systems designs space based ISR sensors navigation and timing systems missile defense subsystems and airborne combat systems including sensors processors and precision weapons.

• Aerojet Rocketdyne produces propulsion systems for missiles space launch vehicles and hypersonic weapons as well as power and armament products for defense and space missions.

L3Harris Technologies Inc holds a strong position as a leading supplier of secure communication and mission critical systems in the defense industry. The company competes with large defense contractors such as BAE Systems Boeing General Dynamics Lockheed Martin Northrop Grumman RTX Thales and emerging firms like Anduril Ursa Major and Silvus Technologies. Its competitive advantages include deep domain expertise long standing customer relationships and a broad portfolio of patented technologies.

The company serves United States government departments and agencies including the Department of Defense the Department of War and NASA as well as prime contractors and international allied forces.

Investment Thesis

▲ Bull case

LHX's strategic positioning as a Trusted Disruptor uniquely captures the convergence of urgent defense priorities and industrial base revitalization, creating a structural growth tailwind that extends well beyond 2026. The company's backlog has nearly doubled to over $40 billion—representing two times annual revenue—excluding the $25 billion in pending Munitions Acceleration Council orders currently under negotiation. This backlog expansion, achieved without including the MAC orders, provides substantial visibility and predictability, with management indicating the potential to reach $60 billion to $70 billion of backlog within the next twelve months once these programs convert to contracts. The international book-to-bill ratio of 2.2 underscores accelerating global demand, particularly in resilient communications and missionized business jets, where LHX booked $460 million in orders from three NATO countries and secured a $2.2 billion international missionized business jet program with an initial $726 million order. This international momentum is further supported by a roughly $40 billion international ISR business pipeline, signaling substantial long-term opportunity outside the domestic market that remains underappreciated in current guidance. The Missile Solutions segment, poised for IPO as "Axyv," benefits from a $1 billion Department of War investment that accelerates solid rocket motor capacity expansion, directly addressing critical munition shortages highlighted by recent conflicts depleting Pentagon supplies. This investment, combined with LHX's focus on increasing revenue per employee by almost 25% over the past couple of years through productivity gains and AI-driven technology investments, creates operating leverage that could drive margin expansion beyond the current low 16% guidance. The classified work segment, now representing 28% of total revenue and growing faster than the overall business, provides high-margin, resilient growth insulated from cyclical defense budget fluctuations, with management noting a sole-source $600 million contract with potential for billions in follow-on—a differentiator not fully reflected in segment reporting. With R&D and innovation spend rising 44% in the quarter and an all-in innovation rate of roughly 10% when including customer-funded R&D contracts, LHX is building sustainable competitive advantages in high-growth areas like hypersonic tracking (HPTSS follow-on proposal submitted) and space sensing, positioning the company to capitalize on evolving threats without relying solely on traditional contract wins.

LHX's strategic positioning as a Trusted Disruptor uniquely captures the convergence of urgent defense priorities and industrial base revitalization, creating a structural growth tailwind that extends well beyond 2026. The company's backlog has nearly doubled to over $40 billion—representing two times annual revenue—excluding the $25 billion in pending Munitions Acceleration Council orders currently under negotiation. This backlog expansion, achieved without including the MAC orders, provides substantial visibility and predictability, with management indicating the potential to reach $60 billion to $70 billion of backlog within the next twelve months once these programs convert to contracts. The international book-to-bill ratio of 2.2 underscores accelerating global demand, particularly in resilient communications and missionized business jets, where LHX booked $460 million in orders from three NATO countries and secured a $2.2 billion international missionized business jet program with an initial $726 million order. This international momentum is further supported by a roughly $40 billion international ISR business pipeline, signaling substantial long-term opportunity outside the domestic market that remains underappreciated in current guidance. The Missile Solutions segment, poised for IPO as "Axyv," benefits from a $1 billion Department of War investment that accelerates solid rocket motor capacity expansion, directly addressing critical munition shortages highlighted by recent conflicts depleting Pentagon supplies. This investment, combined with LHX's focus on increasing revenue per employee by almost 25% over the past couple of years through productivity gains and AI-driven technology investments, creates operating leverage that could drive margin expansion beyond the current low 16% guidance. The classified work segment, now representing 28% of total revenue and growing faster than the overall business, provides high-margin, resilient growth insulated from cyclical defense budget fluctuations, with management noting a sole-source $600 million contract with potential for billions in follow-on—a differentiator not fully reflected in segment reporting. With R&D and innovation spend rising 44% in the quarter and an all-in innovation rate of roughly 10% when including customer-funded R&D contracts, LHX is building sustainable competitive advantages in high-growth areas like hypersonic tracking (HPTSS follow-on proposal submitted) and space sensing, positioning the company to capitalize on evolving threats without relying solely on traditional contract wins.

▼ Bear case

Despite strong headline growth, LHX faces significant near-term execution risks and structural headwinds that the market may be overlooking, particularly regarding the sustainability of margin expansion and the realism of backlog conversion. Segment operating margin increased only 10 basis points year over year to 15.7%, with management acknowledging that asset sales contributed 30-40 basis points to Missile Solutions margin in the quarter—offset by unfavorable EAC adjustments—revealing underlying margin pressure that one-time gains are masking. The Missile Solutions segment's margin improvement to 12.5% was driven by legacy asset monetization and higher production volumes, but net unfavorable EAC adjustments indicate potential cost overruns or estimation risks in long-term programs, a concern amplified by the segment's reliance on volume growth in lower-margin programs as noted by the CFO, who cited higher growth in businesses with lower average margin as a partial offset to margin expansion. Free cash flow was an outflow of $187 million in Q1, characterized as typical for working capital timing, but this pattern raises concerns about cash conversion efficiency, especially as the company guides to $3 billion in annual free cash flow while simultaneously increasing R&D and capacity investments by 44% in the quarter—suggesting potential strain on liquidity if working capital trends do not reverse as expected. The backlog growth, while impressive, depends heavily on the successful conversion of the $25 billion in pending MAC orders by year-end, a process described by the CEO as involving complex framework agreements with primes like Lockheed and Raytheon, with conversion timing contingent on primes turning their agreements into contracts—a multi-step process that could delay revenue recognition and create volatility in quarterly results. International growth, though above 20%, is concentrated in specific NATO markets and resilient communications, with the Communications & Spectrum Dominance segment showing only 3% revenue growth, indicating uneven international demand that may not persist if geopolitical tensions ease or allied defense spending priorities shift. The planned IPO of Missile Solutions (Axyv) and the Department of War investment introduce execution risk, as management explicitly stated that impacts from these transactions are not reflected in current 2026 or 2028 guidance and will only be considered upon execution, creating uncertainty around future capital structure, potential dilution, and the ability to realize synergies post-separation. Furthermore, the company's reliance on sole-source contracts for classified work—while currently a strength—carries inherent risk of future recompete or budget reallocation, especially as international ISR opportunities, though cited as a $40 billion pipeline, remain subject to lengthy sales cycles and political approval processes that could delay order realization, as evidenced by the CEO's acknowledgment that closing international deals takes significant time and effort.

Despite strong headline growth, LHX faces significant near-term execution risks and structural headwinds that the market may be overlooking, particularly regarding the sustainability of margin expansion and the realism of backlog conversion. Segment operating margin increased only 10 basis points year over year to 15.7%, with management acknowledging that asset sales contributed 30-40 basis points to Missile Solutions margin in the quarter—offset by unfavorable EAC adjustments—revealing underlying margin pressure that one-time gains are masking. The Missile Solutions segment's margin improvement to 12.5% was driven by legacy asset monetization and higher production volumes, but net unfavorable EAC adjustments indicate potential cost overruns or estimation risks in long-term programs, a concern amplified by the segment's reliance on volume growth in lower-margin programs as noted by the CFO, who cited higher growth in businesses with lower average margin as a partial offset to margin expansion. Free cash flow was an outflow of $187 million in Q1, characterized as typical for working capital timing, but this pattern raises concerns about cash conversion efficiency, especially as the company guides to $3 billion in annual free cash flow while simultaneously increasing R&D and capacity investments by 44% in the quarter—suggesting potential strain on liquidity if working capital trends do not reverse as expected. The backlog growth, while impressive, depends heavily on the successful conversion of the $25 billion in pending MAC orders by year-end, a process described by the CEO as involving complex framework agreements with primes like Lockheed and Raytheon, with conversion timing contingent on primes turning their agreements into contracts—a multi-step process that could delay revenue recognition and create volatility in quarterly results. International growth, though above 20%, is concentrated in specific NATO markets and resilient communications, with the Communications & Spectrum Dominance segment showing only 3% revenue growth, indicating uneven international demand that may not persist if geopolitical tensions ease or allied defense spending priorities shift. The planned IPO of Missile Solutions (Axyv) and the Department of War investment introduce execution risk, as management explicitly stated that impacts from these transactions are not reflected in current 2026 or 2028 guidance and will only be considered upon execution, creating uncertainty around future capital structure, potential dilution, and the ability to realize synergies post-separation. Furthermore, the company's reliance on sole-source contracts for classified work—while currently a strength—carries inherent risk of future recompete or budget reallocation, especially as international ISR opportunities, though cited as a $40 billion pipeline, remain subject to lengthy sales cycles and political approval processes that could delay order realization, as evidenced by the CEO's acknowledgment that closing international deals takes significant time and effort.

Consolidation Items Breakdown of Revenue (2026)

Peer Comparison

Companies in the Aerospace & Defense

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	BA	Boeing Co	1,106.33 Bn	575.32	12.00	47.21 Bn
2	RTX	RTX Corp	258.51 Bn	34.01	2.86	33.20 Bn
3	GD	General Dynamics Corp	174.86 Bn	40.28	3.25	8.01 Bn
4	LMT	Lockheed Martin Corp	119.99 Bn	25.03	1.60	20.70 Bn
5	HWM	Howmet Aerospace Inc.	107.26 Bn	61.54	12.44	4.69 Bn
6	TDG	TransDigm Group INC	76.18 Bn	40.87	8.02	31.28 Bn
7	NOC	Northrop Grumman Corp /De/	73.88 Bn	16.14	1.74	14.41 Bn
8	RKLB	Rocket Lab Corp	60.59 Bn	-331.77	89.15	0.00 Bn

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Investment Thesis

Segments Breakdown of Revenue (2026)

Consolidation Items Breakdown of Revenue (2026)

Peer Comparison

Research Tools

Developers

About

Investment Thesis

Segments Breakdown of Revenue (2026)

Consolidation Items Breakdown of Revenue (2026)

Peer Comparison

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