7. L3Harris Technologies, Inc. (NYSE:LHX)
Average Price Target Upside as of August 15: 13.69%
Forward P/E as of August 15: 17.5
L3Harris Technologies, Inc. (NYSE:LHX) is an advanced technology company that operates in the aerospace and defense industry. The company focuses on key business segments including, Integrated Mission Systems, Space and Airborne Systems, Communication Systems, and Aerojet Rocketdyne. L3Harris Technologies, Inc. (NYSE:LHX) sells its technologies to governments and private customers around the globe.
The company posted a successful second quarter of 2024, with revenue growing 13% year-over-year to reach $5.3 billion during the quarter. The revenue growth was mainly on the back of strong performance in the Communication and Aerojet Rocketdyne segments, both contributing $1.35 billion and $581 million to the consolidated revenue, respectively. What sets L3Harris Technologies, Inc. (NYSE:LHX) ahead of its competition is its international mix and margin opportunities. Over the past year, the company has been able to improve its operating income by 19% to reach $400 million and its margins have improved by 50 bps, indicating operational efficiency and profitability of its business.
The Space and Airborne Systems segment improved its operational margins by 280 base points to 12.6%. Moreover, management has also initiated its LHX NeXt initiatives, which focus on increasing cost competitiveness and driving operational agility.
The strong market demand for L3Harris Technologies, Inc. (NYSE:LHX) products can be estimated by its ability to land new awards worth more than $5 billion over the quarter. These new awards resulted in a strong order backlog of $32 billion indicating robust growth for upcoming quarters.
Capitalizing on its strong business presence the company has increased its revenue guidance to $21.0 billion – $21.3 billion (the previous range was $20.8 billion to $21.3 billion). Moreover, L3Harris Technologies, Inc. (NYSE:LHX) is also cheap at current levels as it is trading at 17.5 times its forward earnings, while the market sits at a forward P/E ratio of 22. The company’s earnings are also expected to rise by 4% during the year to reach $3.48. 27 analysts have a consensus buy rating on the stock, with their median price target of $257 presenting an upside of 13.69% from the current level.
Diamond Hill Mid Cap Strategy made the following comment about L3Harris Technologies, Inc. (NYSE:LHX) in its Q3 2023 investor letter:
“L3Harris Technologies, Inc. (NYSE:LHX) is a defense contractor focused primarily on communications, surveillance and electronic warfare. We anticipate the US’s defense budget will be better than expected over the next few years as the Defense Department focuses on preparing for peer-level threats — an area in which LHX’s capabilities fit nicely. We believe there is room for improvement in recent execution — particularly at recently acquired Aerojet Rocketdyne — and we think LHX’s new management team is well-qualified to improve results. We accordingly capitalized on a recent share-price decline to initiate a position at what we consider a compelling valuation.”
