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On Wednesday, Bernstein changed their rating on L3Harris Technologies (NYSE:LHX) stock from Market Perform to Outperform, while adjusting the price target to $267 from the previous $289.
The decision followed a significant decline in defense stocks after the recent elections, with L3Harris shares experiencing a notable drop. According to InvestingPro data, the stock is currently trading near its 52-week low of $200.18, with technical indicators suggesting oversold conditions.
The analysts believe that despite the current uncertainty surrounding defense budget limits, President Trump's support for strong defense capabilities, as observed during his first term, is likely to continue. This anticipated support has altered Bernstein's previously cautious stance on defense stocks from 2024, which was influenced by concerns over budget constraints.
With a market capitalization of $38.5 billion and impressive revenue growth of 13.32% over the last twelve months, L3Harris maintains a strong position in the defense sector. InvestingPro subscribers can access 12 additional key insights about the company's performance and outlook.
L3Harris Technologies, according to Bernstein, now presents a more attractive valuation compared to its peers Lockheed Martin (NYSE:LMT), Raytheon Technologies (NYSE:RTX), and Northrop Grumman (NYSE:NOC). While trading at a P/E ratio of 32.03, the company offers a solid dividend yield of 2.29% and has maintained dividend payments for 54 consecutive years. The firm pointed out that L3Harris is not as heavily invested in shipbuilding as General Dynamics (NYSE:GD) or Huntington Ingalls Industries (NYSE:HII), sectors which may face slower improvement.
Additionally, L3Harris has less exposure to the F-35 program than Lockheed Martin and Northrop Grumman, which could be advantageous given the program's scrutiny under the Trump administration. Despite this, Bernstein expects the F-35 program to receive support, especially considering export prospects. For detailed analysis and comprehensive valuation metrics, investors can access the full Pro Research Report available on InvestingPro.
The upgrade reflects the analysts' view that the recent pullback in L3Harris's stock price has created an opportunity for investors, considering the company's positioning in the defense sector and the potential for continued governmental support under the Trump administration. The new price target of $267 represents Bernstein's adjusted outlook, taking into account the current market dynamics and the firm's comparative analysis of industry peers.
In other recent news, L3Harris Technologies has seen significant developments. The company's CEO, Christopher E. Kubasik, established a pre-arranged trading plan for exercising stock options and selling shares. Additionally, the retirement of board member General Peter W. Chiarelli was announced, in line with the company's retirement policy.
Raymond (NS:RYMD) James downgraded L3Harris' stock rating due to concerns about future bookings and recent performance trends. The firm also noted the company's strong financial performance with revenue growth of 13.32% over the last year. However, the company's backlog growth has reached its lowest point in seven quarters, a trend anticipated to continue.
L3Harris secured a significant contract with the U.S. Navy, potentially worth $999 million, to provide advanced communication technology. The company also successfully completed the Safety of Flight qualifications for its Viper Shield electronic warfare suite, designed for F-16 fighter jets.
In financial highlights, L3Harris' Aerojet Rocketdyne segment reported a revenue increase to $598 million in the third quarter due to a significant increase in rocket motor output. Analyst firms BofA Securities, Jefferies, and Truist Securities have upgraded L3Harris' stock and increased price targets, reflecting confidence in the company's growth strategy. These are recent developments in the company's operations.
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