Market Inference Overview -- LHX Stock

L3Harris Technologies logged a -0.2% change during today's morning session, and is now trading at a price of $177.14 per share.

L3Harris Technologies returned losses of -20.0% last year, with its stock price reaching a high of $255.1 and a low of $160.25. Over the same period, the stock underperformed the S&P 500 index by -43.0%. As of April 2023, the company's 50-day average price was $176.8. L3Harris Technologies, Inc., an aerospace and defense technology company, provides mission-critical solutions for government and commercial customers worldwide. Based in Melbourne, FL, the large-cap Industrials company has 46,000 full time employees. L3Harris Technologies has offered a 2.5% dividend yield over the last 12 months.

The Company Has a Highly Leveraged Balance Sheet:

2017-12-31 2018-12-31 2020-02-25 2021-03-01 2022-02-25 2023-02-24
Revenue (MM) $5,900 $6,182 $9,263 $18,194 $17,814 $17,062
Gross Margins 37.0% 36.0% 27.0% 28.0% 30.0% 28.0%
Operating Margins 18% 18% 7% 11% 12% 11%
Net Margins 9.0% 12.0% 9.0% 6.0% 10.0% 6.0%
Net Income (MM) $553 $718 $822 $1,119 $1,846 $1,062
Net Interest Expense (MM) -$170 -$168 -$123 -$254 -$265 -$279
Depreciation & Amort. (MM) -$311 -$259 -$153 -$323 -$340 -$333
Earnings Per Share $4.45 $5.93 $6.82 $5.18 $9.38 $5.23
EPS Growth n/a 33.26% 15.01% -24.05% 81.08% -44.24%
Diluted Shares (MM) 124 121 120 216 197 203
Free Cash Flow (MM) $688 $887 $1,092 $3,067 $3,012 $2,378
Capital Expenditures (MM) -$119 -$136 -$153 -$277 -$325 -$220
Net Current Assets (MM) -$5,089 -$4,349 -$9,280 -$9,452 -$9,031 -$8,146
Long Term Debt (MM) $3,396 $3,408 $6,694 $6,943 $7,048 $6,225
Net Debt / EBITDA 2.56 2.54 7.58 2.45 2.51 2.73

L3Harris Technologies has weak revenue growth and a flat capital expenditure trend, average net margins with a negative growth trend, and flat EPS growth. The company's financial statements also display irregular cash flows and just enough current assets to cover current liabilities. Furthermore, the firm suffers from slimmer gross margins than its peers and a highly leveraged balance sheet.

A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:

L3Harris Technologies has a trailing twelve month P/E ratio of 41.8, compared to an average of 20.49 for the Industrials sector. Based on its EPS guidance of $13.38, the company has a forward P/E ratio of 13.2. The company doesn't issue forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is -0.8%. On this basis, the company's PEG ratio is -49.67, which indicates that its shares are overpriced. In contrast, the market is likely undervaluing L3Harris Technologies in terms of its equity because its P/B ratio is 1.82 while the sector average is 3.78. The company's shares are currently trading 70.6% above their Graham number.

L3Harris Technologies Has an Average Rating of Buy:

The 18 analysts following L3Harris Technologies have set target prices ranging from $164.0 to $338.0 per share, for an average of $227.89 with a buy rating. As of April 2023, the company is trading -22.4% away from its average target price, indicating that there is an analyst consensus of strong upside potential.

L3Harris Technologies has a very low short interest because 0.9% of the company's shares are sold short. Institutions own 83.9% of the company's shares, and the insider ownership rate stands at 0.54%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 9% stake in the company is worth $3,177,862,006.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.