With L3Harris’ (LHX) space, missile, and high-tech businesses continuing to excel and looking poised to do so for the foreseeable future, LHX seems poised to expand rapidly in the medium-to-long term.
Add in the company’s formidable third-quarter results, along with the attractive valuation of LHX stock, and it becomes clear that some investors should consider buying the shares.
L3’s Space and Missile Businesses Still Look Superb
In my previous article on LHX, I noted that the firm’s space and missile businesses had been performing well and appeared to be well-positioned to meaningfully boost the firm’s financial results going forward. After reviewing recent developments involving the company and examining its third-quarter results, I still have the same view.
L3’s space-based missile defense system is still likely to grow rapidly over the medium-to-long term. In my prior column, I asserted that the firm would probably benefit from the Trump administration’s Golden Dome anti-missile initiative, much of which looks poised to be based in space. Providing evidence of L3’s optimism about the future of its space business is its launch of a new factory in Alabama which is manufacturing “inert rocket motor parts.” These parts will be used in both offensive and defensive missiles.
Moreover, Scott Alexander, an L3 Harris executive who oversees missile solutions, indicated that the firm is benefiting from “surging demand” for these products. And Angel Crespo, a vice president at the firm’s Aerojet Rocketdyne unit, reported that LHX is pouring nearly $500 million into its rocket motor business. In all likelihood, LHX’s decision to spend so much money on the undertaking means that the firm is very confident in its outlook.
Speaking of Aerojet Rocketdyne, the rocket maker’s revenue soared 15% last quarter versus the same period a year earlier, excluding the impact of a divestment of one of its businesses. Additionally, its operating margin rose to 12.7% last quarter, compared with 11.4% in Q3 of 2024, while its operating income soared 26% year-over-year to $96 million. .
Also importantly, CEO Christopher Kubasik noted that LHX’s offerings are being utilized on “every major (missile) interceptor program,” and he has reported that the company is slated to provide “40 to 45 proven HVTSS satellites” that will be used by Golden Dome,.
Meanwhile, the Space Force last month noted that L3’s Advanced Tracking and Launch Analysis System, or ATLAS, had become operational. The product is monitoring objects in space for the military branch.
Finally, also illustrating the strength of L3’s space businesses, the operating income of its Space & Airborne Systems climbed 11.7% year-over-year in Q3 to $218 million.
L3’s Promising High-Tech Initiatives
One of the firm’s projects that utilize advanced, cutting-edge technology is its Navigation Technology Satellite 3 or NTS-3. The product, which is “designed to test advancements beyond today’s GPS,” according to Kubasik, was launched by the Space Force in August. The company has stated that NTS-3 is “the first fully reprogrammable Positioning, Navigation and Timing (PNT) satellite (and) will provide warfighters with responsive and flexible capability to ensure mission success.”
Additionally, in October, the U.S. Army awarded the company a $24 million contract to provide “software-defined data devices” for its Next Generation Command and Control system. Kubasik noted that the devices provide “resilience and interoperability across NATO and Homeland Security Networks,” along with “high data throughput and multiple transport options.”
Finally, the U.S., Poland, and five other nations have purchased L3’s Viper Shield electronic warfare (EW) system. The product enables “pilots to identify, locate and counter rapidly evolving threats faster with enhanced success,” according to the company, which reported in August that it was holding talks about providing Viper Shield to other nations.
Strong Overall Q3 Results and an Attractive Valuation
L3’s revenue advanced 10% YOY, excluding acquisitions and divestments, to $5.7 billion, while its earnings per share, excluding certain items, climbed 10% to $2.70. Even more impressively, its operating income surged 25% to $62 million.
On the valuation front, the shares are changing hands at a forward price-earnings ratio of 24 times. Given the firm’s strong growth and excellent prospects, that valuation is rather low.
The Bottom Line on LHX Stock
I continue to believe that, as I stated in my last column, “investors looking for increased exposure to large defense stocks should consider L3’s shares.”
*This article is intended to be informational only; it is not financial advice.
