Core Viewpoint - L3Harris (LHX) reported quarterly earnings of $3.47 per share, exceeding the Zacks Consensus Estimate of $3.43 per share, and showing an increase from $3.35 per share a year ago, indicating a positive earnings surprise of 1.17% [1][2] Financial Performance - The company achieved revenues of $5.52 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.30% and up from $5.34 billion year-over-year [2] - Over the last four quarters, L3Harris has consistently surpassed consensus EPS estimates and revenue estimates [2] Stock Performance - L3Harris shares have increased approximately 0.8% since the beginning of the year, while the S&P 500 has gained 2.7%, indicating underperformance relative to the broader market [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it is expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $3.29 on revenues of $5.3 billion, and for the current fiscal year, it is $14.19 on revenues of $21.7 billion [7] - The trend of estimate revisions for L3Harris is mixed, which could change following the recent earnings report [6] Industry Context - The Aerospace - Defense industry, to which L3Harris belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, which may impact the stock's performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that industry outlook can significantly affect stock performance [5][8]

Financial Performance - Fourth quarter 2024 diluted EPS was $2.37, a 186% increase year-over-year, while full-year diluted EPS reached $7.87, up 22%[15]. - Fourth quarter 2024 revenue was $5.5 billion, a 3% increase, and full-year revenue was $21.3 billion, up 10%[6]. - Net income for 2024 increased to $1,512 million, up from $1,198 million in 2023, representing a growth of 26.2%[54]. - The company reported an operating income of $1,918 million for 2024, up from $1,426 million in 2023, marking a growth of 34.5%[57]. - The full year diluted EPS rose to $7.87 in 2024 from $6.44 in 2023, with Non-GAAP diluted EPS increasing to $13.10 from $12.36[62]. Cash Flow and Capital Management - 2024 cash from operations was $2.6 billion, a 22% increase, and adjusted free cash flow was $2.3 billion, up 14%[17]. - Operating cash flow for 2024 was $2,559 million, compared to $2,096 million in 2023, reflecting an increase of 22.1%[54]. - The net cash provided by operating activities for Q4 2024 was $1,129 million, up from $789 million in Q4 2023, leading to an adjusted free cash flow of $1,033 million compared to $756 million[63]. - The total adjusted free cash flow for the full year 2024 was $2,319 million, an increase from $2,029 million in 2023[63]. - The company repurchased $554 million in common stock during the year, compared to $518 million in the previous year, reflecting a 6.9% increase[54]. - The company paid dividends totaling $886 million in 2024, up from $868 million in 2023, an increase of 2.1%[54]. Operational Efficiency - The company exceeded its cost-savings target for 2024, achieving $800 million, and raised the overall goal to $1.2 billion by the end of 2025[4]. - The adjusted segment operating margin for the fourth quarter was 15.3%, a 20 basis points increase, and for the full year, it was 15.4%, up 60 basis points[12]. - Fourth quarter operating margin decreased by 340 bps to 22.7%, while the full year operating margin increased by 10 bps to 24.3%[35]. - Adjusted segment operating margin for the fourth quarter decreased by 170 bps to 24.4%, with a full year increase of 50 bps to 24.7%[35]. - The adjusted segment operating income for 2024 was $3,292 million, compared to $2,874 million in 2023, representing a growth of 14.6%[57]. Future Guidance - The company expects 2025 revenue guidance to be between $21.8 billion and $22.2 billion, with adjusted segment operating margins projected in the mid to high 15% range[43]. - Non-GAAP diluted EPS guidance for 2025 is set at $10.55 to $10.85, reflecting a growth of approximately 10% compared to 2024[43]. - The company anticipates adjusted free cash flow for 2025 to be between $2.4 billion and $2.5 billion, compared to $2.3 billion in 2024[43]. - The effective tax rate on non-GAAP income for 2025 is projected to be between 11.0% and 12.0%[46]. Tax Efficiency - The effective tax rate for GAAP in 2024 was 5.3%, compared to 1.9% in 2023[8]. - The effective tax rate on Non-GAAP income for the full year 2024 was 12.7%, compared to 13.0% in 2023, indicating improved tax efficiency[61]. - In Q4 2024, the company reported a Non-GAAP income before income taxes of $755 million, with an effective tax rate of 12.1% compared to 12.6% in Q4 2023[61]. - For the full year 2024, the company achieved a Non-GAAP income before income taxes of $2,876 million, with an effective tax rate of 12.7%, compared to 13.0% in 2023[61]. Market Demand and Backlog - The company achieved a record backlog of $34 billion, reflecting strong demand across all domains[4]. - Fourth quarter revenue growth was driven by Integrated Mission Systems and Communication Systems, which increased by 9% and 5%, respectively[9]. - Fourth quarter revenue for the AR segment increased by 5% to $628 million, with full year revenue soaring by 123% to $2,347 million[38]. - The book-to-bill ratio for 2024 was 1.14x, with orders totaling $24.2 billion[6]. Asset Management - Cash and cash equivalents at the end of the period increased to $615 million from $560 million, a rise of 9.8%[55]. - Total assets grew to $42,001 million in January 2025, compared to $41,687 million in December 2023, an increase of 0.8%[55]. - Long-term debt decreased slightly to $11,081 million from $11,160 million, a reduction of 0.7%[55]. Miscellaneous - The company noted potential impacts on Q1 2025 bookings and revenue due to U.S. Government contracting officers assessing the effects of recent Executive Orders[42]. - The company incurred $21 million in cash used for merger, acquisition, and severance costs in Q4 2024, down from $48 million in Q4 2023[63]. - The company plans to revise its Non-GAAP diluted EPS metric starting in Q1 2025 to exclude amortization of acquisition-related intangible assets, aligning with industry standards[66].

Core Viewpoint - L3Harris Technologies, Inc. (LHX) is expected to report its fourth-quarter 2024 results on January 30, 2025, with a consensus estimate indicating a 3.1% growth in sales year-over-year to $5.51 billion and a 2.4% increase in earnings per share to $3.43 [1][8][9] Segment Performance - The Integrated Mission Systems (IMS) segment is anticipated to show mixed results, with higher sales from avionics and advanced electronics, but potentially impacted by lower commercial aviation sales due to a recent strike. The revenue estimate for IMS is $1,626.2 million, reflecting a slight decline of 0.1% from the previous year [3][4] - The Space and Airborne Systems (SAS) unit is expected to benefit from strong sales in Intel & Cyber programs, with a revenue estimate of $1,824.2 million, indicating a 1.3% increase year-over-year. However, challenges from divestitures and lower F-35 volumes may affect performance [5][6] - The Communication Systems unit is projected to see growth driven by increased demand for resilient communication equipment, with a revenue estimate of $1,391.5 million, representing a 2.1% increase from the prior year [7] Earnings Expectations - Overall, L3Harris is expected to report notable growth in its top line, supported by positive synergies from the acquisition of Aerojet Rocketdyne. The consensus estimate for earnings is $3.43 per share, which implies a 2.4% increase from the year-ago quarter [8][9] - Despite the positive growth expectations, the model does not predict a definitive earnings beat for L3Harris, as the Earnings ESP stands at -0.17% and the company holds a Zacks Rank of 3 (Hold) [10][11]

Core Insights - The article emphasizes the expansion of coverage in the aerospace and defense sectors, including major original equipment manufacturers and European defense contractors [2]. Group 1: Industry Overview - The aerospace and defense industry presents significant growth prospects, driven by data-informed analysis [2]. - The investing group aims to identify investment opportunities within the aerospace, defense, and airline sectors [2]. Group 2: Analytical Tools - The article mentions the availability of data analytics monitors to support investment analysis [2].

Group 1 - The article discusses the strategy of hedging investment portfolios against uncertainties such as recessions, wars, and pandemics by investing in all-weather businesses [1] - The author has been involved in dividend investing since 2009 and has been documenting their journey towards financial independence through a blog focused on dividend growth investing since July 2018 [1] - The author expresses gratitude for the blog's role in connecting them with the Seeking Alpha community as an analyst [1] Group 2 - The article does not provide any specific company or industry analysis, focusing instead on personal investment philosophy and experiences [2]

Core Viewpoint - L3Harris (LHX) is currently viewed as a better value opportunity compared to Airbus Group (EADSY) based on various financial metrics and rankings [1]. Group 1: Zacks Rank and Earnings Outlook - L3Harris has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while Airbus Group has a Zacks Rank of 4 (Sell) [3]. - The Zacks Rank system emphasizes companies with positive earnings estimate revisions, suggesting that LHX is likely experiencing an improvement in its earnings outlook [3]. Group 2: Valuation Metrics - LHX has a forward P/E ratio of 16.96, significantly lower than EADSY's forward P/E of 29.89 [5]. - The PEG ratio for LHX is 1.85, while EADSY's PEG ratio is 3.26, indicating that LHX is expected to grow earnings at a more favorable rate relative to its price [5]. - LHX's P/B ratio stands at 2.21, compared to EADSY's P/B of 6.82, further highlighting LHX's relative undervaluation [6]. Group 3: Overall Value Assessment - Based on the solid earnings outlook and favorable valuation figures, LHX is assessed as the superior value option compared to EADSY [7].

Group 1 - L3Harris Technologies (NYSE: LHX) provides comprehensive technology solutions across various domains including space, air, land, sea, and cyber in the defense market [1] - The company is transitioning into a pure player in the defense technology sector, indicating a focused strategy on defense-related offerings [1] - The investment approach emphasizes fundamental analysis, long-term growth, and quality, targeting companies with strong growth potential and reasonable valuations [1] Group 2 - The investment strategy involves constructing a diversified portfolio of 15-20 stocks, focusing on risk management and macro-driven sector weights [1] - The goal is to achieve a 15% annual return, reflecting a disciplined approach to trading and valuations [1]

Zacks Premium and Style Scores - Zacks Premium offers daily updates of Zacks Rank and Zacks Industry Rank, full access to the Zacks 1 Rank List, Equity Research reports, and Premium stock screens to help investors make informed decisions [1] - Zacks Style Scores are complementary indicators that help investors pick stocks with the best chances of beating the market over the next 30 days, with ratings from A to F based on value, growth, and momentum characteristics [3] - The Style Scores are divided into four categories: Value Score, Growth Score, Momentum Score, and VGM Score, which combines all three styles [4][5][6][7] Zacks Rank and Style Scores Integration - Zacks Rank uses earnings estimate revisions to build a winning portfolio, with 1 (Strong Buy) stocks producing an average annual return of +25.41% since 1988, more than double the S&P 500 [8][9] - To maximize returns, investors should consider stocks with a Zacks Rank 1 or 2 and Style Scores of A or B, as these have the highest probability of success [10] - Stocks with a 3 (Hold) rank should also have Style Scores of A or B to ensure upside potential, while stocks with 4 (Sell) or 5 (Strong Sell) ratings, even with high Style Scores, are likely to decline due to downward-trending earnings forecasts [11][12] L3Harris Technologies (LHX) Analysis - L3Harris Technologies, Inc was formed in 2019 through the merger of L3 Technologies and Harris Corporation and operates in aerospace and defense, with four major business segments following the acquisition of Aerojet Rocketdyne in 2023 [13] - LHX has a Zacks Rank of 3 (Hold) and a VGM Score of B, with a Momentum Style Score of A and shares up 1% over the past four weeks [14] - For fiscal 2024, five analysts revised their earnings estimates upwards in the last 60 days, increasing the Zacks Consensus Estimate by $0.03 to $13.09 per share, with an average earnings surprise of 2.8% [14][15]

Company and Industry Overview * **Company**: L3Harris Technologies, Inc. (NYSE:LHX) * **Market Cap**: $50 billion * **Industry**: Aerospace & Defense * **Focus**: Trusted disruptor in the industry, delivering advanced capabilities for U.S. industry allies, leading industry operating margins, mid-teens and trending higher. Key Growth Drivers * **Space**: Significant growth with over 40 satellite contracts awarded by the Space Development Agency. * **Air**: Flattish industry growth, but focus on electronic warfare and components. * **Navy and Maritime**: Growth area with focus on autonomy, including autonomous surface and autonomous undersea vehicles. * **Land**: Networks, radios, and night vision goggles. * **Cyber**: $1 billion cyber business growing well over the last few years. * **Aerojet Rocketdyne**: Acquisition driving growth, with significant demand and investments in new facilities. Business Model and Strategy * **Commercial Business Model**: Selling to the government in a commercial-like manner, reducing regulations and streamlining the acquisition process. * **Agile and Responsive**: Positioning the company to rapidly respond to changing threats or budget dynamics. * **Innovation**: Investing in venture capital, strategic partnerships (e.g., Palantir), and technology development. Communications Systems * **Tactical Radios**: Significant growth opportunities with a $10 billion pipeline of opportunities. * **Software-Defined Radios**: Focus on software and network capabilities, with a new go-to-market approach. * **Interoperability**: High demand for interoperable hardware, particularly in Europe. Aerojet Rocketdyne * **Demand**: Significant demand for solid rocket motors, with high demand and investments in new facilities. * **Supply Chain**: Addressing supply chain challenges through long-term agreements and investments in new facilities. * **Employee Morale**: High employee satisfaction and retention rates. LHX NeXt * **Cost Savings**: Targeting $1 billion in run rate savings by 2026, with $600 million expected in 2024. * **Transformation**: Transforming the business function by function, investing in technology, and streamlining operations. * **Employee Engagement**: High employee engagement and motivation. Future Outlook * **Revenue**: Targeting $23 billion in sales by 2026. * **Margins**: Targeting at least 16% margins by 2026. * **Free Cash Flow**: Targeting $2.8 billion of free cash flow per share by 2026. * **Innovation**: Embracing new entrants and technology to disrupt the industry.

L3Harris Technologies NYSE: LHX has many factors in its favor to provide ample tailwind for share prices, including Donald Trump. His defense policies were a boon to the defense industry during the first administration and will likely do so again. The opportunity for investors is that the stock outperformed in a bullish market and will likely do so again. The stock rose by 100% from November 2016 through November 2020 and is on track to set new highs in 2024 and 2025.  Get L3Harris Technologies alerts:L3Har ...