Stock Analysis & Valuation L3Harris Technologies, Inc. (0L3H.L)

• Previous Close: £342.70
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	n/a	n/a
Intrinsic value (DCF)	83.44	-76
Graham-Dodd Method		n/a
Graham Formula	105.50	-69

Strategic Investment Analysis

Company Overview

L3Harris Technologies, Inc. (LSE: 0L3H.L) is a leading aerospace and defense technology company headquartered in Melbourne, Florida, with a rich history dating back to 1895. Specializing in mission-critical solutions, L3Harris serves government and commercial customers globally across four key segments: Integrated Mission Systems, Space and Airborne Systems, Communication Systems, and Aviation Systems. The company provides advanced ISR (intelligence, surveillance, and reconnaissance) systems, tactical communications, space payloads, electronic warfare, and air traffic management solutions. With a market capitalization of over $44.5 billion, L3Harris is a key player in the defense and industrial sectors, leveraging cutting-edge technology to support national security and commercial aviation. Its diversified portfolio and strong R&D capabilities position it as a critical supplier to the U.S. Department of Defense and allied nations, while its commercial aviation training and communication systems enhance its resilience across market cycles.

Investment Summary

L3Harris Technologies presents a compelling investment case due to its strong positioning in the defense sector, consistent government contracts, and diversified revenue streams. The company's $21.3 billion revenue and $1.5 billion net income in the latest fiscal year reflect stable demand for its mission-critical solutions. However, investors should consider risks such as high total debt ($12.2 billion) and dependence on U.S. defense spending. The stock's beta of 0.717 suggests lower volatility compared to the broader market, making it a relatively defensive play. The dividend yield, supported by a $4.68 per share payout, adds income appeal. Long-term growth hinges on continued defense budget expansions and successful integration of technological advancements in space and communication systems.

Competitive Analysis

L3Harris Technologies competes in the highly consolidated aerospace and defense sector, where scale, technological expertise, and government relationships are critical. The company benefits from its merger with L3 Technologies in 2019, which expanded its capabilities in ISR, electronic warfare, and space systems. Its competitive advantages include a strong foothold in classified defense programs, a diversified product portfolio, and long-term contracts with the U.S. military and allied forces. However, it faces intense competition from larger primes like Lockheed Martin and Northrop Grumman, which have greater resources for R&D and M&A. L3Harris differentiates itself through agility in mid-tier defense solutions and a focus on high-growth areas such as unmanned systems and secure communications. Its Communication Systems segment, in particular, holds a strong position in tactical radios and SATCOM, competing directly with Raytheon and Thales. While the company's margins are pressured by R&D and integration costs, its ability to secure multi-year contracts provides revenue visibility.

Major Competitors

• Lockheed Martin Corporation (LMT): Lockheed Martin is the largest defense contractor globally, with dominant positions in fighter jets (F-35), missiles, and space systems. Its scale and prime contractor status give it an edge in securing large Pentagon contracts, but its reliance on a few major programs poses concentration risks. Compared to L3Harris, Lockheed has higher revenue but less exposure to tactical communications and ISR.
• Northrop Grumman Corporation (NOC): Northrop Grumman specializes in stealth technology, autonomous systems, and space (e.g., James Webb Telescope). It competes with L3Harris in ISR and electronic warfare but has a stronger position in classified programs and bomber aircraft (B-21). Northrop's larger R&D budget allows for more innovation, though L3Harris is more diversified in commercial aviation solutions.
• Raytheon Technologies Corporation (RTX): Raytheon Technologies is a leader in missiles, radars, and aerospace systems post its merger with United Technologies. It overlaps with L3Harris in defense electronics and space sensors but has a broader commercial aerospace exposure (Pratt & Whitney, Collins Aerospace). Raytheon's stronger international sales contrast with L3Harris' U.S.-centric revenue base.
• BAE Systems plc (BAES.L): BAE Systems is a major European defense contractor with strengths in naval systems, cybersecurity, and electronic warfare. It competes with L3Harris in maritime and airborne ISR but has a larger footprint in Europe and the Middle East. BAE's weaker profitability compared to L3Harris reflects higher exposure to lower-margin vehicle and shipbuilding programs.
• Thales Group (THLE.F): Thales is a key player in defense electronics, air traffic management, and secure communications, directly competing with L3Harris' Communication Systems segment. Its strong European government ties provide stability, but it lacks L3Harris' depth in U.S. defense contracts. Thales' commercial aerospace exposure (avionics) is a hedge against defense cyclicality.