Last Update 22 Dec 25
Fair value Increased 0.30%LHX: Future Missile Demand Will Drive Earnings Momentum And Premium Multiple
The analyst price target for L3Harris Technologies has been nudged higher, with our fair value estimate rising by about $1 to approximately $335. This reflects analysts modestly upgrading long term growth expectations following stronger 3Q25 results and an improved outlook for future contract awards, despite slightly lower projected profit margins and a marginally higher discount rate.
Analyst Commentary
Street research commentary around L3Harris Technologies has turned more constructive following the latest quarterly update, with multiple price target increases reflecting improved confidence in both execution and long term growth prospects.
Analysts are updating their models to reflect stronger than expected 3Q25 performance and a healthier outlook for future program wins, particularly in areas leveraged to ongoing aerospace and defense demand.
Bullish Takeaways
- Bullish analysts have raised their price targets into the low to mid $350 range. This signals that they see meaningful upside from current levels as earnings power compounds over the next several years.
- Model updates point to stronger medium term revenue growth, supported by expectations for additional contract awards and solid positioning across key defense and aerospace programs.
- Positive sentiment around aircraft production and resilient aftermarket activity is viewed as a tailwind for L3Harris Technologies, reinforcing confidence in the companys ability to convert its backlog into cash flow.
- Recent results are seen as evidence of improved execution, with bullish analysts more willing to underwrite a premium valuation multiple relative to prior periods of uncertainty.
Bearish Takeaways
- More cautious analysts flag that defense spending visibility remains somewhat nuanced, with political and budget dynamics posing potential constraints on longer term growth assumptions.
- There is concern that a challenging government funding backdrop could delay or resize certain awards. This would weigh on the pace of backlog conversion and earnings growth.
- Some investors remain focused on execution risk around integrating complex programs and maintaining margins in a tight labor and supply chain environment, which could cap further multiple expansion.
What's in the News
- Former L3Harris subsidiary employee Peter Williams pleaded guilty to stealing and selling eight U.S. government zero day cyber exploits to a Russian linked broker, raising governance and security oversight questions around Trenchant operations (Cyberscoop).
- L3Harris is scheduled to report quarterly earnings with Wall Street consensus at $2.57 per share, which is keeping investor focus on order momentum, margin trajectory and cash generation (earnings calendar).
- The Pentagon is urging missile suppliers, including L3Harris, to double or quadruple production of critical munitions, which is highlighting structurally higher demand for advanced missiles and propulsion systems (Wall Street Journal).
- U.S. Defense Secretary Pete Hegseth has called an urgent in person meeting of top military commanders, which is underscoring an elevated defense readiness posture that could sustain spending on key contractors such as L3Harris (Washington Post).
- L3Harris secured an up to $843 million Space Development Agency contract to build 18 Tranche 3 Tracking Layer infrared satellites, which is expanding its role in missile defense and space based sensing for advanced threats.
Valuation Changes
- Fair Value Estimate has risen slightly, from about $334.16 to approximately $335.15 per share, reflecting modestly improved long term expectations.
- Discount Rate has increased marginally, moving from roughly 7.99 percent to about 8.04 percent, implying a slightly higher required return on equity.
- Revenue Growth has edged higher, with medium term annual growth assumptions increasing from around 5.50 percent to roughly 5.53 percent.
- Net Profit Margin has declined slightly, easing from about 10.97 percent to roughly 10.90 percent, tempering some of the benefit from stronger growth assumptions.
- Future P/E has moved up modestly, from roughly 27.49 times to about 27.78 times forward earnings, indicating a small expansion in the valuation multiple.
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.
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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.