Last Update12 Sep 25Fair value Increased 0.95%
The consensus analyst price target for L3Harris Technologies rose to $302.58 on the back of strong Q2 results, higher future guidance, and improved sector sentiment amid rising defense spending, despite some margin and program risks.
Analyst Commentary
- Bullish analysts cite strong Q2 results and continued momentum, leading to higher guidance for 2025 and increased 2026 targets.
- Anticipation of significant benefits from emerging Department of Defense (DoD) programs and shifting U.S. defense priorities supports upward price target revisions.
- The extension of defense spending growth, driven by new mandatory funding approved via the Reconciliation bill and rising global threat levels, is seen as a key positive for top-line growth.
- Margins remain "noisy" and U.S. defense remains described as a "mixed bag," prompting some analysts to maintain neutral or hold ratings despite price target increases.
- Improving budget trends and sector inflection potential around Q2 reporting are expected to help restore investor confidence in L3Harris Technologies' outlook.
What's in the News
- China has begun limiting the supply of critical minerals essential for Western defense manufacturers, causing production delays and forcing companies such as L3Harris Technologies to seek alternative sources (WSJ, 2025-08-04).
- China supplies about 90% of the world’s rare earths, increasing the risk of supply chain disruption for defense companies including L3Harris Technologies (WSJ, 2025-08-04).
- The U.S. administration has proposed a defense budget of $892.6B, flat year-over-year, prioritizing pay raises for troops and increased spending on high-tech missiles and drones (Reuters, 2025-06-26).
- The proposed budget includes fewer ships and fighter jets, with potential job cuts at the Navy, but maintains procurement focus on advanced defense technologies relevant to L3Harris Technologies (Reuters, 2025-06-26).
Valuation Changes
Summary of Valuation Changes for L3Harris Technologies
- The Consensus Analyst Price Target remained effectively unchanged, moving only marginally from $299.74 to $302.58.
- The Future P/E for L3Harris Technologies remained effectively unchanged, moving only marginally from 25.36x to 25.59x.
- The Consensus Revenue Growth forecasts for L3Harris Technologies remained effectively unchanged, at 5.2% per annum.
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.
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