| Company | Aug 25 | Sep 25 | Oct 25 | Nov 25 | Dec 25 | Jan 26 | Feb 26 | Mar 26 | Apr 26 | May 26 | Jun 26 | Jul 26 | 12-Mo |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LHX | +1% | +10% | -5% | -3% | +5% | +17% | +6% | -5% | -7% | -2% | -7% | -5% | +2% |
| EOPSF | — | — | — | — | — | -5% | +4% | -6% | +12% | +19% | -7% | -35% | -25% |
| HAGHY | -5% | +25% | -18% | -25% | +8% | +14% | -11% | -1% | +1% | +17% | -25% | +19% | -15% |
| BAESY | -1% | +19% | -11% | -13% | +8% | +17% | +7% | +0% | -3% | -2% | -10% | +16% | +21% |
| ESLT | +3% | +6% | -6% | -1% | +23% | +22% | +9% | +10% | -1% | +5% | -14% | +7% | +74% |
| RTX | +1% | +6% | +7% | -2% | +5% | +10% | +1% | -5% | -9% | +2% | +6% | +13% | +39% |
Source: Yahoo Finance monthly adjusted close.
Quick Thesis
- Rated Hold — the stock already prices in durable defense earnings.
- Strongest strength: $1.7B of TTM operating cash flow.
- Main risk: 3.2x net debt/EBITDA, which leaves less room for error.
- Valuation is rich at 30.4x EV/EBITDA and 19.5x forward P/E.
- I would turn more constructive if EBITDA stays above $1.1B next quarter.
Executive Summary
Rating: SELL | LHX
We’ll begin tracking this call’s performance since publication once sufficient adjusted-close data is available.
I would put my rating as a Hold because the stock already discounts a lot of the good news, while the latest quarter only shows moderate earnings acceleration rather than a step change. Revenue rose 8.4% year over year in Q2 2026 to $5.9B, EBITDA reached $1.1B, and net income climbed to $586M, so the operating base is healthy. The financial strength I weight most is $1.7B of operating cash flow TTM, which gives L3Harris room to fund capital needs and support the 1.1% dividend yield. The main risk is 3.2x net debt/EBITDA TTM, because leverage is meaningful if cash conversion softens. I would turn more constructive if L3Harris can hold EBITDA above $1.1B in the next quarter and keep net debt/EBITDA below 3.0x, meaning leverage would start to come down in a way that supports the current multiple.
Company Profile
L3Harris Technologies is a defense and aerospace contractor focused on communications, sensors, electronic systems, space, and mission support. It earns revenue from long-cycle government and allied-customer programs, where execution, qualification, and installed base matter more than short-term pricing. That mix gives the company a steadier demand profile than many industrial peers, but it also ties results to program timing and budget cycles.
Economic Moat
Business Model
The moat case rests on program depth and switching costs. L3Harris sells into mission-critical defense and space systems, where customers value reliability, certification, and integration with existing platforms more than the lowest bid. That makes the business harder to displace quickly than a commodity supplier, and it helps explain why the company can sustain a 30.4% gross margin and a 16.7% EBITDA margin TTM.
Business & Operating Risks
The main disclosed risks are execution on large programs, dependence on government spending, and the usual defense-contracting exposure to schedule slips, cost overruns, and procurement timing. Those risks do not break the moat, but they do test it: if program execution slips, the very scale and integration that support the moat can turn into margin pressure instead of an advantage. In my view, the disclosed risks are more about earnings volatility than about a structural loss of competitive position.
Management Discussion & Analysis
Management appears to be responding with continuity rather than disruption. Kenneth Sharp’s appointment as chief financial officer and Sam Mehta’s expanded remit across Space & Mission Systems and Communications & Spectrum Dominance suggest a tighter operating focus, while Jonathan Rambeau’s departure looks like a leadership reset inside the portfolio rather than a sign of stress. The company is also leaning into cash generation and capital discipline, which is the right response to 3.2x net debt/EBITDA.
Recent Events
The April 16, 2026 agreement for a $1B strategic investment in Aerojet Rocketdyne Holdings, Inc. by the United States Department of War is the clearest recent positive for the defense ecosystem, but I would not treat it as a direct L3Harris catalyst without a clearer linkage in the filing. What it does show is that the broader missile and space supply chain is still attracting government-backed capital, which supports the end markets L3Harris serves. The May 11, 2026 annual meeting was also orderly: shareholders elected all 11 directors, approved executive pay, ratified Ernst & Young LLP, and rejected easier special meetings, which leaves governance stable rather than transformative.
Financial Analysis
Growth
LHX — Financial Growth (Quarterly, USD Mil)
| Metric | 2025-06-30 | 2025-09-30 | 2025-12-31 | 2026-03-31 | 2026-06-30 |
|---|---|---|---|---|---|
| REVENUE (USD Mil) | 5,426 | 5,659 | 5,648 | 5,744 | 5,881 |
| EBIT (USD Mil) | 676 | 719 | 525 | 725 | 839 |
| EBITDA (USD Mil) | 979 | 1,028 | 836 | 1,007 | 1,127 |
| NET INCOME (USD Mil) | 458 | 462 | 300 | 512 | 586 |
| DILUTED EPS | 2.4 | 2.5 | 1.6 | 2.7 | 3.1 |
Source: Yahoo Finance — Quarterly Financial Statements
Revenue reached $5.9B in Q2 2026, up 8.4% year over year, after $5.7B in Q1 2026, and EBITDA rose faster than sales to $1.1B. Net income increased to $586M from $458M a year earlier, so the earnings line is still outpacing the top line, which is what I want to see from a defense prime with a moat built on program execution. The Q4 2025 dip to $5.6B of revenue and $300M of net income looks like a temporary swing rather than a broken trend, but it also shows why I want another quarter before calling this a re-rating story.
Profitability
LHX — Profitability (TTM)
| Metric | TTM |
|---|---|
| Operating Margin (TTM) | 9.7% |
| Net Margin (TTM) | 10.4% |
| Gross Margin (TTM) | 30.4% |
| EBITDA Margin (TTM) | 16.7% |
Source: Yahoo Finance — Trailing Twelve Months (TTM)
TTM operating margin of 9.7%, gross margin of 30.4%, and EBITDA margin of 16.7% show a business that is already profitable at the operating level. The 20.7-point gap between gross margin and operating margin tells me overhead is still heavy, so the next leg of value creation has to come from scale leverage rather than just stable product economics. Net margin is 10.4% TTM, which is slightly above operating margin and suggests below-the-line items are helping rather than hurting; that is cleaner than many capital-intensive names, but I would still watch whether operating margin can move closer to gross margin over time.
Valuation
LHX — Valuation Multiples
| Metric | Value |
|---|---|
| Market Cap (USD Mil) | 48,897 |
| Enterprise Value (USD Mil) | 65,179 |
| Trailing P/E | 26.5 |
| Forward P/E | 19.5 |
| Price/Sales (TTM) | 3.8 |
| Price/Book (mrq) | 2.6 |
| EV/Revenue | 5.1 |
| EV/EBITDA | 30.4 |
| Beta (5Y Monthly) | 0.75 |
| FCF Yield % (TTM) | — |
| Forward EPS (USD) | 13.5 |
| Analyst Target Price – Low (USD) | 269 |
| Analyst Target Price – Mean (USD) | 341.7 |
| Analyst Target Price – High (USD) | 393 |
| # Analyst Opinions | 11 |
Source: Yahoo Finance
L3Harris screens expensive on the numbers that matter most to me: EV/EBITDA is 30.4x, forward P/E is 19.5x, and trailing P/E is 26.5x. Price/Sales is 3.8x and EV/Revenue is 5.1x, so the market is paying a premium for earnings durability, not for a low base multiple. That premium is easier to defend because the company is generating $1.7B of operating cash flow TTM, but it still leaves little margin for disappointment if growth slows or leverage stops improving.
With 11 analyst opinions, the consensus target range is $269 to $393, with a $341.7 mean. On the analysis here, I would put fair value in a range of roughly $171 to $316 per share, which sits below the analyst mean because I weight the 3.2x net debt/EBITDA load and the still-heavy 30.4x EV/EBITDA multiple more than the consensus appears to. That range is not a guarantee; it is my read on what the current cash flow and margin profile justify if growth normalizes. On earnings, I would frame fair EPS power at about 12.5 to 13.5, which is close to the company’s own 13.5 forward EPS and implies the stock is already pricing in a fairly full recovery. Against peers, that EPS level looks rich on a like-for-like basis because L3Harris is trading at a higher revenue multiple than BAESY and RTX without a clearly superior margin profile.
Leverage
LHX — Leverage & Coverage (Quarterly)
| Metric | Value |
|---|---|
| Total Debt/Equity % (mrq) | 34.6 |
| Total Debt (mrq, USD Mil) | 7,926 |
| Operating Cash Flow (TTM, USD Mil) | 1,655 |
| Net Debt/EBITDA (TTM) | 3.2 |
Source: Yahoo Finance — Quarterly Financial Statements
L3Harris carries $7.9B of total debt and 34.6% debt to equity, with net debt/EBITDA at 3.2x TTM. Operating cash flow was $1.7B TTM, which is enough to support the structure, but not enough to make leverage a competitive advantage. I read the balance sheet as manageable rather than strong: the company can service the debt, yet the leverage load still matters because the valuation already assumes steady execution.
Insider Activity
The insider transaction record is one-sided, with 10 open-market sales and 0 open-market purchases across the period shown. That does not prove a fundamental problem, but it does tell me insiders are not leaning in at current prices. Given that insider ownership is only 0.5%, the signal is incremental rather than decisive, yet it still nudges the thesis toward caution.
Comparable Analysis
Growth
| Company | Revenue TTM (USD Mil) | Revenue Growth YoY % | Diluted EPS TTM |
|---|---|---|---|
| LHX | 12,856 | 190.0% | 9.9 |
| EOPSF | — | — | -0.3 |
| HAGHY | 2,678 | 22.2% | 0.1 |
| BAESY | 29,380 | 7.7% | 3.8 |
| ESLT | 8,546.1 | 15.9% | 13.3 |
| RTX | 93,500 | 14.5% | 5.7 |
Source: Yahoo Finance
L3Harris’s revenue growth of 190.0% TTM and diluted EPS of 9.9 sit far above BAESY’s 7.7% revenue growth and 3.8 EPS, RTX’s 14.5% and 5.7, and ESLT’s 15.9% and 13.3, while HAGHY is at 22.2% revenue growth with 0.1 EPS and EOPSF is still negative at -0.3 EPS. That makes L3Harris look like the fastest grower in the group, but I would not pay for growth alone because the peer set is still growing at mid-teens rates rather than collapsing. The key question is whether the current step-up can persist long enough to justify the richer multiple.
Valuation
| Company | Trailing P/E | Forward P/E | EV/Revenue | EV/EBITDA | Price/Sales (TTM) | Price/Book (mrq) | Market Cap (USD Mil) | Enterprise Value (USD Mil) | Beta (5Y Monthly) | FCF Yield % (TTM) | Forward EPS | Analyst Target Price – Low | Analyst Target Price – Mean | Analyst Target Price – High | # Analyst Opinions |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LHX | 26.5 | 19.5 | 5.1 | 30.4 | 3.8 | 2.6 | 48,897 | 65,179 | 0.75 | — | 13.5 | 269 | 341.7 | 393 | 11 |
| EOPSF | — | — | — | — | — | 6.3 | 1,266 | — | — | — | — | — | — | — | — |
| HAGHY | 83.9 | — | 5.1 | 39.8 | 4.3 | 11.2 | 11,631 | 13,765 | 0.47 | 2.6% | — | — | — | — | — |
| BAESY | 30.1 | 21.6 | 3.1 | 24.1 | 2.9 | 5.1 | 83,979 | 90,500 | -0.05 | 3.5% | 5.3 | 132.8 | 136.4 | 140 | 2 |
| ESLT | 54.6 | 39.5 | 4 | 34.6 | 4 | 7.7 | 34,020 | 34,048 | -0.27 | -0.1% | 18.4 | 518 | 835.5 | 1,075 | 6 |
| RTX | 37 | 26.7 | 3.4 | 19.8 | 3 | 4.3 | 282,901 | 314,296 | 0.29 | 3.5% | 7.9 | 200 | 234.8 | 265 | 22 |
Source: Yahoo Finance
L3Harris trades at 5.1x EV/Revenue, 26.5x trailing P/E, 19.5x forward P/E, and 3.8x price/sales, versus BAESY at 3.1x, 30.1x, 21.6x, and 2.9x; RTX at 3.4x, 37.0x, 26.7x, and 3.0x; and ESLT at 4.0x, 54.6x, 39.5x, and 4.0x. On a growth-adjusted basis, that is not cheap, especially because L3Harris does not have a clear profitability lead over RTX. The stock also lagged on a one-year total return basis, with L3Harris at -3.3% versus BAESY at 21.0%, RTX at 35.9%, and ESLT at 60.1%, so the market has not rewarded it for the same degree of optimism it is now pricing into the multiple.
Profitability
| Company | Operating Margin (TTM) | Net Margin (TTM) | Return on Assets (TTM) | Return on Equity (TTM) | Gross Margin (TTM) | EBITDA Margin (TTM) |
|---|---|---|---|---|---|---|
| LHX | 9.7% | 10.4% | — | — | 30.4% | 16.7% |
| EOPSF | 0.0% | 0.0% | — | — | — | — |
| HAGHY | 5.2% | 4.5% | 3.1% | 12.9% | 21.0% | 12.9% |
| BAESY | 9.7% | 7.2% | 4.8% | 18.6% | 13.3% | 12.8% |
| ESLT | 9.6% | 7.4% | 3.9% | 15.2% | 25.0% | 11.5% |
| RTX | 12.7% | 8.3% | 4.2% | 12.3% | 20.3% | 17.0% |
Source: Yahoo Finance
L3Harris’s 9.7% operating margin, 10.4% net margin, 30.4% gross margin, and 16.7% EBITDA margin compare well with HAGHY’s 5.2%, 4.5%, 21.0%, and 12.9%, and they are broadly in line with BAESY and ESLT. RTX still edges L3Harris on operating margin at 12.7% and EBITDA margin at 17.0%, which tells me the company is not the clear profitability leader even though its gross margin is stronger than RTX’s 20.3%. That combination matters: the moat is visible in gross margin, but the market is still waiting for more of that advantage to flow through to operating profit.
Leverage
| Company | Total Debt/Equity % (mrq) | Current Ratio (mrq) | Total Debt (mrq, USD Mil) | Operating Cash Flow TTM (USD Mil) | Net Debt/EBITDA (TTM) | FCF Margin % (TTM) |
|---|---|---|---|---|---|---|
| LHX | 34.6 | — | 7,926 | 1,655 | 3.2 | — |
| EOPSF | — | — | — | — | — | — |
| HAGHY | 172.8 | 1.1 | 1,690 | 567 | 3.2 | 11.3% |
| BAESY | 73 | 1 | 9,153 | 5,601 | 1.3 | 10.0% |
| ESLT | 19.3 | 1.4 | 852.2 | 992.2 | -0.1 | -0.4% |
| RTX | 57 | 1 | 38,856 | 14,206 | 1.9 | 10.6% |
Source: Yahoo Finance
L3Harris’s 34.6% debt/equity and 3.2x net debt/EBITDA are lower than HAGHY’s 172.8% and 3.2x, but above RTX’s 57.0% debt/equity and 1.9x net debt/EBITDA. BAESY looks cleaner at 73.0% debt/equity and 1.3x net debt/EBITDA, while ESLT is the least levered at 19.3% debt/equity and -0.1x net debt/EBITDA. The peer set makes the point clearly: L3Harris is not the most stretched name, but it also is not the safest balance sheet, so the valuation premium has to be earned through execution rather than leverage relief.
Conclusion
I would put my rating as a Hold because the core tension is still unresolved: the business is executing well enough to support the current multiple, but not so well that I can call the stock cheap. Revenue grew 8.4% year over year in Q2 2026 to $5.9B, EBITDA reached $1.1B, and net income rose to $586M, so the earnings base is moving in the right direction. At the same time, 3.2x net debt/EBITDA and a 30.4x EV/EBITDA multiple leave little room for a stumble, which is why I do not see enough margin of safety to move more bullishly today.
I would raise my rating more toward a Buy if L3Harris can keep EBITDA above $1.1B for another quarter and push net debt/EBITDA below 3.0x, meaning leverage would start to fall in a way that confirms the cash flow base is strengthening. That would tell me the current earnings level is durable rather than a one-quarter peak, and it would make the present valuation easier to defend. I would move from Hold to Sell if revenue slips back below $5.7B or EBITDA falls under $1B, because either result would suggest the market is paying a premium for a run rate the business cannot sustain. In that case, the current forward P/E of 19.5x would look too high for the growth actually being delivered.
Weighing both sides, I think the bull case needs proof over the next two reporting periods, while the bear case only needs one soft quarter to start compressing the multiple. That is why I stay cautious rather than constructive: the stock can work from here, but only if the margin and cash-flow trend keeps improving instead of flattening out.
What to Watch Next
- EBITDA above $1.1B — would support a move toward Buy.
- Net debt/EBITDA below 3.0x — would show leverage is easing.
- Revenue above $5.7B — would confirm the current run rate is holding.
- Another quarter of net income above $500M — would support earnings durability.
- Any clearer link between the Aerojet investment and L3Harris programs — would strengthen the moat thesis.
What’s your take? I rated L3Harris Technologies (LHX) SELL above — but the goal here is to get this right, not just to publish an opinion. What would you add to this analysis, or which risk or catalyst do you think I’m under- or over-weighting? Tell me in the comments.
Sources
- SEC 8-K Filing (2026-05-12)
- SEC 8-K Filing (2026-04-30)
- SEC 8-K Filing (2026-04-23)
- SEC 8-K Filing (2026-03-12)
- SEC 8-K Filing (2026-03-02)
- SEC 8-K Filing (2026-02-06)
- SEC Form 4 Insider Transaction (2026-05-12)
- SEC Form 4 Insider Transaction (2026-05-12)
- SEC Form 4 Insider Transaction (2026-05-12)
Data sourced from Yahoo Finance and SEC EDGAR. Not investment advice.
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