On Thursday, L3Harris reported third-quarter revenue of $5.3 billion, up by 8%, topping the analyst consensus of $5.28 billion. The defense contractor reported adjusted EPS of $3.34, above consensus estimates of $3.26.
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L3Harris revised its full-year 2024 revenue guidance from $21 billion -- $21.3 billion to $21.1 billion -- $21.3 billion. The company also narrowed its full-year EPS forecast from $12.85-$13.15 to $12.95-$13.15.
Analysts rerated L3Harris after the print. Truist analyst Michael Ciarmoli reiterated the Buy rating on L3Harris with a price target of $293. RBC Capital analyst Ken Herbert maintained a Sector Perform rating on L3Harris with a price target of $240.
Truist: L3Harris reported third-quarter revenues of $5.3 billion, marking an 8% year-over-year increase and 5% organic growth, mainly due to strong demand in key segments. Integrated Mission Systems (IMS) posted a 6.6% revenue increase with notable demand in aircraft missionization and munitions electronics. In comparison, Communication Systems (CS) grew by 10%, driven by software-defined radio orders from NATO.
Aerojet Rocketdyne (AR) continued its momentum with 31% growth year-over-year despite missing consensus estimates by 5.8%. Ciarmoli noted that segment margins benefited from NeXt savings, favorable volume mix, and improved program execution.
The NeXt program's cost savings will likely reach $600 million in 2024, exceeding the previous $400 million forecast. The accelerated savings timeline supports L3Harris' target to achieve $1 billion in savings one year ahead of schedule.
Third-quarter orders surged 44% year-over-year, with a 1.4x book-to-bill ratio pushing the backlog to $33.6 billion. Standout orders include $600 million for the Next Gen Jammer, a $1.2 billion IDIQ for P-8A, around $1 billion for software-defined radios, and a contract for the Glide Phase Interceptor.
Ciarmoli highlighted that the modest FY guidance lift implies, at the midpoint, a fourth-quarter short of Street. Ciarmoli expects management to provide more insights on future booking trends and segment-specific growth trajectories for 2025.
There's also a keen interest in the competitive landscape, especially given partnerships with companies like Palantir Technologies Inc and updates on high-priority programs like HADES. Ciarmoli also anticipates commentary on how L3Harris plans to navigate an evolving defense sector with increasing traction from startup defense firms.