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On Thursday, Wolfe Research raised its rating for L3Harris Technologies (NYSE:LHX) from Peerperform to Outperform, setting a price target of $300.00. This decision stems from the company's strong margin performance and management's recent upward revision of its 2026 margin target during the third-quarter call.
L3Harris Technologies has outpaced its competitors with a 400 basis point lead in margins. The management of L3Harris has signaled further improvements by raising the margin target from "16%" to ">16%". This adjustment suggests there may be significant untapped potential, which the company is expected to clarify during the upcoming third-quarter call.
The defense contractor has achieved workforce reductions of 5% in the current year, contributing to its margin expansion. Additionally, L3Harris Technologies has been actively consolidating facilities and streamlining its supply chain, measures that are anticipated to bolster its financial performance further.
The company's acquisition-related margins have been inflated in its profit and loss statements due to purchase accounting practices. However, these effects are projected to diminish by 2026, reducing concerns over the quality of earnings. The easing of these accounting impacts is seen as another factor that could enhance the company's margin profile in the coming years.
In other recent news, L3Harris Technologies landed a contract potentially worth $587.4 million from the U.S. Navy to provide new tactical jamming pods over the next five years. The company also reported a 9% increase in non-GAAP earnings per share for the second quarter of 2024, alongside a substantial backlog of $32 billion. Despite not securing the High Accuracy Detection and Exploitation System contract from the US Army, Jefferies reiterated a Buy rating for L3Harris, maintaining a stock price target of $275. However, Morgan Stanley downgraded L3Harris's stock from Overweight to Equalweight. CEO Christopher E. Kubasik established a trading plan for exercising stock options and selling the corresponding shares.
InvestingPro Insights
L3Harris Technologies' recent rating upgrade by Wolfe Research aligns with several positive indicators from InvestingPro data. The company's revenue growth of 15.44% over the last twelve months and 12.91% in the most recent quarter supports the analyst's optimistic outlook. This growth trajectory, coupled with the company's margin improvement initiatives, reinforces the potential for continued financial strength.
InvestingPro Tips highlight that L3Harris has raised its dividend for 22 consecutive years, demonstrating a commitment to shareholder returns that complements its operational improvements. The company's position as a prominent player in the Aerospace & Defense industry further solidifies its market standing.
For investors seeking a deeper understanding of L3Harris Technologies' potential, InvestingPro offers 11 additional tips, providing a comprehensive view of the company's financial health and market position.
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