L3Harris Technologies, Inc. (LHX) Bundle
Understanding L3Harris Technologies, Inc. (LHX) Revenue Streams
Understanding L3Harris Technologies, Inc.’s Revenue Streams
For the year 2024, L3Harris Technologies, Inc. reported total revenue of $15,802 million, representing a 12% increase compared to the $14,079 million reported in 2023.
Breakdown of Primary Revenue Sources
The revenue streams can be categorized into products and services across different business segments:
| Segment | Products Revenue (2024) | Services Revenue (2024) | Total Revenue (2024) |
|---|---|---|---|
| SAS | $5,141 million | $1,683 million | $6,824 million |
| IMS | $5,069 million | $1,671 million | $6,740 million |
| CS | $4,022 million | $1,382 million | $5,404 million |
| AR | $1,719 million | $596 million | $2,315 million |
| Total | $15,802 million | $5,332 million | $21,134 million |
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth rates for the three quarters ended September 27, 2024, compared to the prior year are as follows:
- SAS: 2% increase
- IMS: 1% increase
- CS: 8% increase
- AR: 278% increase
Contribution of Different Business Segments to Overall Revenue
The contributions of each segment to the overall revenue for the three quarters ended September 27, 2024 are detailed below:
| Segment | Revenue Contribution |
|---|---|
| SAS | 32.4% |
| IMS | 32.1% |
| CS | 25.4% |
| AR | 10.1% |
Analysis of Significant Changes in Revenue Streams
The acquisition of AJRD significantly impacted revenue, contributing approximately $1,264 million in additional revenue to the AR segment for the three quarters ended September 27, 2024. This acquisition has been a key factor in the notable revenue growth observed in the AR segment.
Overall, the revenue growth is attributed to increased demand across several segments, particularly in Tactical Communications and Integrated Vision Solutions, which saw increases of $71 million and $31 million, respectively.
Moreover, in the services sector, the revenue increased by $654 million primarily due to higher services revenues in the AR segment from the acquisition of AJRD.
Quarterly Revenue Performance Comparison
The following table summarizes the revenue performance for the quarter ended September 27, 2024, compared to the quarter ended September 29, 2023:
| Quarter | Total Revenue (2024) | Total Revenue (2023) | Percentage Change |
|---|---|---|---|
| Q3 | $5,292 million | $4,915 million | 8% increase |
A Deep Dive into L3Harris Technologies, Inc. (LHX) Profitability
A Deep Dive into L3Harris Technologies, Inc. Profitability
Gross Profit Margin: For the quarter ended September 27, 2024, gross profit was $1,419 million, resulting in a gross margin of 26.8% compared to 26.6% in the prior year quarter. For the three quarters ended September 27, 2024, gross profit totaled $4,127 million, with a gross margin of 26.1% versus 26.0% for the same period last year.
Operating Profit Margin: Operating income for the quarter ended September 27, 2024, was $495 million, yielding an operating margin of 9.4% compared to 9.7% in the previous year. For the three quarters, operating income reached $1,349 million with an operating margin of 8.5%, slightly rising from 9.0% year-over-year.
Net Profit Margin: The net income attributable to the company for the quarter ended September 27, 2024, was $400 million, resulting in a net profit margin of 7.6%. For the three quarters, net income was $1,049 million, with a net profit margin of 6.6%, down from 7.6% in the prior year.
Trends in Profitability Over Time
Year-over-year comparisons show a mixed trend in profitability. The gross margin has remained relatively stable, while the operating and net margins have shown slight declines in the most recent quarter compared to the same quarter last year. This indicates potential challenges in managing operational costs despite revenue growth.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, L3Harris Technologies' gross margin of 26.8% is slightly above the defense sector average of approximately 25%. The operating margin of 9.4% is in line with the industry average of 9.5%, while the net profit margin of 7.6% slightly underperforms against the average of 8% for similar companies in the sector.
Analysis of Operational Efficiency
The company has demonstrated strong operational efficiency through effective cost management. General and administrative expenses for the quarter were $924 million, representing 17% of total revenue, consistent with the previous year's 17%. This indicates stable control over administrative costs. The gross margin trend also suggests that the company is maintaining its pricing power amid rising costs.
| Metric | Quarter Ended September 27, 2024 | Quarter Ended September 29, 2023 | Three Quarters Ended September 27, 2024 | Three Quarters Ended September 29, 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 26.8% | 26.6% | 26.1% | 26.0% |
| Operating Profit Margin | 9.4% | 9.7% | 8.5% | 9.0% |
| Net Profit Margin | 7.6% | 7.8% | 6.6% | 7.6% |
| General and Administrative Expenses (% of Revenue) | 17% | 17% | 18% | 17% |
Debt vs. Equity: How L3Harris Technologies, Inc. (LHX) Finances Its Growth
Debt vs. Equity: How L3Harris Technologies, Inc. Finances Its Growth
Long-term Debt: As of September 27, 2024, the company had a total long-term debt of $11.7 billion. This includes various fixed and variable-rate debts with maturities extending to 2054.
Short-term Debt: The current portion of long-term debt amounted to $640 million, reflecting obligations due within the next year.
| Debt Instrument | Amount (in millions) | Maturity Date | Interest Rate |
|---|---|---|---|
| Term Loan 2025 | — | November 21, 2025 | Variable |
| 3.95% Notes | — | May 28, 2024 | 3.95% |
| 3.832% Notes | 600 | April 27, 2025 | 3.832% |
| 7.00% Debentures | 100 | January 15, 2026 | 7.00% |
| 3.85% Notes | 550 | December 15, 2026 | 3.85% |
| 5.40% Notes | 1,250 | January 15, 2027 | 5.40% |
| 6.35% Debentures | 26 | February 1, 2028 | 6.35% |
| 4.40% Notes | 1,850 | June 15, 2028 | 4.40% |
| 5.05% Notes | 750 | June 1, 2029 | 5.05% |
| 2.90% Notes | 400 | December 15, 2029 | 2.90% |
| 1.80% Notes | 650 | January 15, 2031 | 1.80% |
| 5.25% Notes | 750 | June 1, 2031 | 5.25% |
| 5.50% Notes | 600 | February 15, 2054 | 5.50% |
Debt-to-Equity Ratio: The company's debt-to-equity ratio stands at 0.62, which is below the industry average of approximately 1.0, indicating a conservative approach to leveraging.
Recent Debt Issuances: In 2024, the company issued $600 million in 5.50% notes due in 2054, which were primarily used to pay down commercial paper obligations.
Credit Ratings: The company currently holds a credit rating of Baa3 from Moody's and BBB- from S&P, reflecting stable credit quality.
Refinancing Activity: On March 14, 2024, the company fully repaid a $2.25 billion term loan using proceeds from newly issued notes with lower interest rates.
Debt Financing vs. Equity Funding: The company employs a balanced approach to financing, utilizing both debt and equity to support growth initiatives while maintaining a manageable debt profile.
Cash and Cash Equivalents: As of September 27, 2024, the company reported cash and cash equivalents of $539 million.
Available Borrowing Capacity: The company has a borrowing capacity of $2.3 billion under its credit agreements, which provides additional financial flexibility.
Assessing L3Harris Technologies, Inc. (LHX) Liquidity
Assessing L3Harris Technologies' Liquidity
Current Ratio: As of September 27, 2024, the current ratio is 0.73, calculated using current assets of $5.82 billion and current liabilities of $7.97 billion.
Quick Ratio: The quick ratio is 0.59, indicating the company has $3.07 billion in quick assets against current liabilities of $7.97 billion.
Analysis of Working Capital Trends
The working capital trend shows that working capital is negative at ($1.15 billion) as current liabilities exceed current assets. This reflects a potential liquidity concern that needs to be monitored closely.
Cash Flow Statements Overview
| Cash Flow Type | Q3 2024 (in millions) | Q3 2023 (in millions) |
|---|---|---|
| Operating Cash Flow | $1,430 | $1,307 |
| Investing Cash Flow | ($151) | ($6,938) |
| Financing Cash Flow | ($1,309) | $5,254 |
Net cash provided by operating activities increased by $123 million compared to the previous year, primarily due to decreases in transaction costs related to acquisitions. However, cash used in investing activities decreased significantly, showing a shift away from large acquisitions.
Potential Liquidity Concerns or Strengths
Despite the positive cash flow from operations, the current and quick ratios indicate potential liquidity challenges with a reliance on external financing. The available borrowing capacity under credit agreements stands at $2.3 billion as of September 27, 2024, which provides a buffer against liquidity issues.
Cash and cash equivalents at the end of the period were $539 million, with $263 million held by foreign subsidiaries, which can be repatriated to the U.S. with minimal tax cost.
Is L3Harris Technologies, Inc. (LHX) Overvalued or Undervalued?
Valuation Analysis
In assessing the valuation of L3Harris Technologies, Inc. (LHX), we analyze key financial ratios, stock price trends, dividend yield, and analyst consensus to determine if the company is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for L3Harris Technologies is 19.8, based on a diluted earnings per share (EPS) of $5.50 for the last twelve months ending September 27, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 2.5, calculated against a book value per share of approximately $87.80.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 12.4, reflecting the company’s enterprise value of approximately $20.8 billion and EBITDA of $1.68 billion.
Stock Price Trends
Over the past 12 months, the stock price has shown significant volatility. The stock price began the year at approximately $223 and reached a peak of $250 in July 2024 before settling at around $215 as of September 27, 2024. The following table summarizes the stock price trends:
| Month | Stock Price ($) |
|---|---|
| September 2023 | 223 |
| December 2023 | 230 |
| March 2024 | 240 |
| June 2024 | 250 |
| September 2024 | 215 |
Dividend Yield and Payout Ratios
The company has a current dividend yield of 1.08%, with an annualized dividend per share of $4.64. The payout ratio is approximately 84%, indicating a strong commitment to returning value to shareholders.
Analyst Consensus
As of now, the consensus among analysts is a hold rating, with 60% of analysts recommending to hold, 30% to buy, and 10% to sell.
In conclusion, the valuation metrics suggest that while the company is performing well, the current market price reflects a cautious sentiment among analysts, indicating it may be fairly valued at present levels.
Key Risks Facing L3Harris Technologies, Inc. (LHX)
Key Risks Facing L3Harris Technologies, Inc.
As of 2024, L3Harris Technologies, Inc. faces several internal and external risks that impact its financial health. These risks can be categorized into operational, financial, and strategic areas.
Industry Competition
The defense and aerospace sectors are characterized by intense competition, which can affect pricing strategies and market share. As of September 27, 2024, the company reported a backlog of $33.8 billion, indicating a strong pipeline of future work. However, competition from other defense contractors poses a risk to maintaining and expanding this backlog.
Regulatory Changes
Changes in government regulations, particularly in defense spending, can significantly impact revenue streams. The effective tax rate for the quarter ended September 27, 2024, was 6.0%, reflecting benefits from research and development credits and tax deductions. Any future changes in tax policy could affect the company's financial position.
Market Conditions
Market conditions, including fluctuations in demand for defense-related products and services, are critical risks. The company reported revenue of $5.292 billion for the quarter ended September 27, 2024, a 8% increase from the prior year, demonstrating resilience but also highlighting the dependency on consistent market demand.
Operational Risks
Operational risks include challenges in project execution and supply chain disruptions. The company has identified issues related to labor and material cost increases impacting contract profitability. As of September 27, 2024, total contract assets were reported at $3.401 billion, with contract liabilities at $1.971 billion, reflecting potential challenges in cash flow management.
Financial Risks
Financial risks are highlighted by the company’s debt levels. As of September 27, 2024, long-term debt was approximately $6.5 billion, with a significant portion maturing in the near term. The company must manage its debt obligations carefully, especially given the rising interest rates.
| Type of Risk | Description | Impact |
|---|---|---|
| Industry Competition | Intense competition from other defense contractors | Pressure on pricing and market share |
| Regulatory Changes | Potential changes in government regulations and tax policy | Impact on revenue and profitability |
| Market Conditions | Fluctuations in demand for defense-related products | Dependency on consistent market demand |
| Operational Risks | Project execution challenges and supply chain disruptions | Impact on contract profitability |
| Financial Risks | High levels of long-term debt | Potential cash flow management challenges |
Mitigation Strategies
The company has implemented several mitigation strategies to address these risks. The LHX NeXt initiative aims to reduce costs and improve operational efficiency. As of September 27, 2024, the company has reported $216 million in costs associated with this initiative, which is expected to enhance competitiveness.
Additionally, the company is actively managing its debt levels and has available borrowing capacity of $2.3 billion under its credit agreements as of the same date. This financial flexibility is crucial for navigating potential market downturns or unexpected costs.
Overall, while L3Harris Technologies, Inc. faces significant risks, it also has strategies in place to mitigate these challenges and maintain its financial health.
Future Growth Prospects for L3Harris Technologies, Inc. (LHX)
Future Growth Prospects for L3Harris Technologies, Inc.
Product Innovations: L3Harris Technologies has focused on developing advanced technology solutions, particularly in the fields of defense and communication. The acquisition of AJRD on July 28, 2023, is expected to enhance capabilities in aerospace and defense sectors, contributing an estimated $1,264 million in additional revenue for the three quarters ended September 27, 2024.
Market Expansions: The company's revenue for the three quarters ended September 27, 2024, reached $15.8 billion, reflecting a 12% increase compared to the prior year. This growth has been driven by higher demand across multiple segments, including Tactical Communications and Integrated Vision Solutions.
Acquisitions: The strategic acquisition of AJRD is part of a broader trend, with L3Harris investing heavily in expanding its portfolio through mergers and acquisitions. The total cash used for acquisitions in the three quarters ended September 27, 2024, was $6.7 billion, significantly impacting growth projections.
| Segment | Revenue (Q3 2024) | Change (%) | Operating Income (Q3 2024) | Operating Margin (%) |
|---|---|---|---|---|
| SAS | $1,683 million | — | $195 million | 11.6% |
| IMS | $1,671 million | 7% | $204 million | 12.2% |
| CS | $1,382 million | 10% | $359 million | 26.0% |
| AR | $596 million | 31% | $75 million | 12.6% |
Future Revenue Growth Projections: Analysts project continued revenue growth driven by the integration of AJRD, with expectations of recognizing approximately 45% of the current backlog of $33.8 billion within the next twelve months. This backlog represents future revenue opportunities across various contracts and projects.
Strategic Initiatives: The LHX NeXt initiative aims to streamline operations and reduce costs, contributing to improved competitiveness. The implementation costs for this initiative totaled $216 million for the three quarters ended September 27, 2024, showcasing the commitment to enhancing operational efficiency.
Competitive Advantages: L3Harris Technologies maintains a strong market position with a diversified product portfolio and a significant presence in the defense sector. The operating income for the three quarters ended September 27, 2024, was $1.35 billion, indicating robust profitability across its segments.
L3Harris Technologies, Inc. (LHX) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- L3Harris Technologies, Inc. (LHX) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of L3Harris Technologies, Inc. (LHX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View L3Harris Technologies, Inc. (LHX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.