Last Update 08 Dec 25
LHX: Earnings Momentum Will Accelerate Amid Expanding Defense And Missile Demand
Analysts have lifted their price target on L3Harris Technologies from $320 to a range of about $350 to $353 per share. This reflects updated models after solid Q3 results and a view that the company is well positioned for future defense awards amid supportive aerospace demand trends.
Analyst Commentary
Bullish analysts point to the recent price target increases into the low to mid $350s as evidence that L3Harris is executing well against expectations and that its earnings power is underappreciated at current levels.
The updated models reflect confidence in both the company specific pipeline and broader sector tailwinds, particularly in aerospace and defense spending.
Bullish Takeaways
- Higher price targets into the $350 to $353 range suggest analysts see upside to the company’s medium term valuation relative to prior assumptions.
- Model revisions after Q3 highlight improving visibility on future defense awards and program wins, supporting expectations for steady revenue and margin expansion.
- Exposure to strengthening aircraft production and resilient aftermarket demand is viewed as a structural growth driver that can support multiple expansion.
- Consensus earnings expectations moving higher into future quarters indicate confidence in management’s ability to execute against a robust backlog.
Bearish Takeaways
- Some cautious analysts flag the potential impact of government funding uncertainties and possible shutdown scenarios on defense budget timing and visibility.
- Defense remains a more nuanced segment, with risks that shifting priorities or procurement delays could pressure near term growth trajectories.
- While sentiment is improving, any slowdown in aerospace production or travel related aftermarket demand could challenge the more optimistic valuation cases.
- Execution missteps on large programs or integration risks across the portfolio could limit the extent to which the stock can sustain a higher premium multiple.
What's in the News
- Former L3Harris executive Peter Williams pleaded guilty to stealing and selling eight U.S. government zero day cyber exploits to a Russian broker in exchange for millions in cryptocurrency, raising governance and security questions around a former company unit. (Cyberscoop)
- The Pentagon is pressing major missile suppliers, including L3Harris, to double or quadruple missile output in anticipation of potential high end conflict, which underscores robust long term demand for advanced munitions. (Wall Street Journal)
- L3Harris and Arkansas officials broke ground on the Arkansas Advanced Propulsion Facilities in Camden, a new solid rocket motor campus that will boost large SRM manufacturing capacity six fold to support tactical and air defense missiles and hypersonic programs.
- L3Harris received a contract exceeding $2.26 billion to deliver modified Bombardier Global 6500 airborne early warning and control aircraft to the Republic of Korea Air Force, expanding its international ISR and command and control footprint.
- The company signed a memorandum of understanding with EDGE Group in the UAE to collaborate on defense opportunities and joint R&D in artificial intelligence and autonomy, deepening its presence in Middle Eastern defense markets.
Valuation Changes
- Fair Value Estimate remains unchanged at approximately $334.16 per share, indicating no material shift in the core intrinsic valuation view.
- The Discount Rate has risen slightly from about 7.94 percent to roughly 7.99 percent, modestly increasing the required return applied to future cash flows.
- Revenue Growth is effectively unchanged, remaining around 5.50 percent and signaling a stable outlook for top line expansion assumptions.
- The Net Profit Margin is effectively unchanged at about 10.97 percent, reflecting consistent expectations for underlying profitability.
- The Future P/E has risen slightly from roughly 27.45x to about 27.49x, implying a marginally higher multiple applied to forward earnings.
Key Takeaways
- Increased U.S. defense budget and international demand could bolster L3Harris's revenue growth through enhanced funding and strong market positioning.
- LHX NeXt and strategic partnerships in AI and communications likely to improve efficiency and expand market reach, driving margin and earnings growth.
- Reliance on external contractors and fixed-price contracts pose risks, while geopolitical tensions and budget constraints threaten revenue and growth for L3Harris.
Catalysts
About L3Harris Technologies- Provides mission-critical solutions for government and commercial customers worldwide.
- The U.S. defense budget is expected to grow, with new defense initiatives and a potential increase in funding that could benefit L3Harris, supporting revenue growth.
- L3Harris is well-positioned in several key growth areas, such as missile warning and tracking, due to recent investments and capability alignment, likely increasing future revenue.
- International demand, especially from NATO allies for advanced communication solutions, is expected to continue strong, supporting revenue growth.
- The company's LHX NeXt initiative focuses on cost optimization and efficiency, leading to potential net margin improvements.
- Strategic collaborations and partnerships, particularly in AI and resilient communications, are expected to expand L3Harris's market reach and potentially drive future earnings growth.
L3Harris Technologies Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming L3Harris Technologies's revenue will grow by 5.2% annually over the next 3 years.
- Analysts assume that profit margins will increase from 7.9% today to 10.8% in 3 years time.
- Analysts expect earnings to reach $2.7 billion (and earnings per share of $15.25) by about September 2028, up from $1.7 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $2.0 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.4x on those 2028 earnings, down from 29.8x today. This future PE is lower than the current PE for the US Aerospace & Defense industry at 34.4x.
- Analysts expect the number of shares outstanding to decline by 1.36% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.15%, as per the Simply Wall St company report.
L3Harris Technologies Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The need for L3Harris to depend on the performance of other contractors, especially on MDAPs where they are a subcontractor, creates significant dependency risks that could impact their timing and efficiency in project completion, potentially affecting revenues.
- Concerns about political and economic tensions between the U.S. and European allies may pose a risk to L3Harris’s international revenues, particularly in communications and defense technology.
- The transition of the F-35 TR-3 mission computing hardware from development to production highlights potential volume concerns that could risk affecting segment revenues and margins.
- L3Harris is engaged in fixed-price development contracts, which carry higher risk of technological and financial challenges, potentially impacting profit margins and earnings.
- Budget constraints within the U.S. government, particularly in the space sector, may affect future revenues and could delay expected growth, impacting overall financial targets.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $299.737 for L3Harris Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $327.0, and the most bearish reporting a price target of just $250.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $24.9 billion, earnings will come to $2.7 billion, and it would be trading on a PE ratio of 25.4x, assuming you use a discount rate of 8.1%.
- Given the current share price of $270.71, the analyst price target of $299.74 is 9.7% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.