Last Update22 Oct 25Fair value Increased 4.58%
The analyst price target for L3Harris Technologies has been raised from approximately $309 to $323. Analysts cite improving growth trends and increased confidence in the company’s ability to capitalize on new defense programs and sector momentum.
Analyst Commentary
Recent analyst updates for L3Harris Technologies provide a variety of perspectives about the company’s near-term prospects, valuation, and execution capabilities ahead of upcoming earnings reports.
Bullish Takeaways- Bullish analysts have recently raised price targets, with some adjustments reaching as high as $353. They cite robust growth momentum and confidence in L3Harris’s positioning within new defense programs.
- Improved sentiment in the broader aerospace and defense sector, along with expectations for strong aftermarket demand linked to passenger travel and supply chain challenges, are viewed as positive indicators for future performance.
- The company’s strong quarterly results and increased future guidance highlight management’s confidence in capturing opportunities from emerging Department of Defense priorities.
- Some analysts note that growth is beginning to accelerate, which could be a potential catalyst for valuation upside as execution aligns more closely with industry trends.
- Bearish analysts remain somewhat cautious and point to “noisy” or less predictable margins that could limit near-term upside despite underlying sales growth.
- Sector-specific headwinds, such as uncertainty around government shutdowns and potential impacts on fiscal outlooks, may create volatility for defense names, including L3Harris.
- Neutral or sector-perform ratings reflect some concern about the sustainability of margin improvements and the pace of earnings acceleration, especially in a more nuanced defense market environment.
What's in the News
- The Pentagon is urging U.S. missile suppliers, including L3Harris Technologies, to significantly increase missile output because of concerns over a potential future conflict with China (The Wall Street Journal).
- China has begun limiting the export of critical minerals to Western defense companies, which is delaying production and forcing companies like L3Harris to seek alternative sources for vital materials (The Wall Street Journal).
- The U.S. Defense Secretary has ordered an urgent meeting of top military commanders at a Marine Corps base, highlighting the increasing focus on military readiness among major defense contractors such as L3Harris (The Washington Post).
- L3Harris Technologies continues to invest in production capacity and technology, expanding manufacturing for propulsion systems and advanced electronics to support both missile programs and next-generation military platforms.
Valuation Changes
- Consensus Analyst Price Target has increased from $309 to $323, reflecting a modest rise in fair value expectations.
- Discount Rate is up marginally from 8.14% to 8.19%. This indicates slightly higher required returns by the market.
- Revenue Growth estimates have edged higher from 5.20% to 5.23% per year.
- Net Profit Margin projections are nearly unchanged, moving from 10.79% to 10.79%.
- Future P/E ratio has risen from 26.05x to 27.27x. This suggests a higher valuation multiple placed on 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.
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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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