L3Harris Q1 Sales Miss, Cash Flow Improves, 2025 Guidance Slashed On Business Repositioning

L3Harris Technologies Inc. LHX shares are trading lower on Thursday after the company reported mixed first-quarter 2025 results.

Recorded sales declined 1.5% year-over-year to $5.123 billion, missing the consensus estimate of $5.22 billion. Revenue fell due to divestitures of the antenna and AOT businesses. Excluding these, organic revenue was flat, with growth in CS and AR offset by declines in IMS and SAS.

The defense contractor reported adjusted earnings of $2.41 per share, up from $2.25 the previous year, beating analyst estimates of $2.32 per share.

Segment Revenues: Space & Airborne Systems (SAS) declined 8% to $1.61 billion, Integrated Mission Systems (IMS) fell 2% to $1.59 billion, Communication Systems (CS) increased 4% to $1.35 billion and that of Aerojet Rocketdyne (AR) climbed 8% to $629 million.

Adjusted operating income for the quarter was $800 million compared to $788 million last year. The operating margin was 15.6%, up 47 basis points year-over-year, boosted by a potent international mix in CS, cost savings, and better IMS performance, partly offset by SAS and AR headwinds.

L3Harris’s operating cash use was $(42) million, improved by income growth and tax strategy from $(104) million a year ago. Adjusted free cash flow was $(72) million, excluding M&A and severance costs.          

The company held $517 million in cash and equivalents as of March 28, 2025.

“We continue to see demand for our solutions, reflecting our alignment with key national security priorities. Our capital deployment strategy remains clear, returning nearly $800 million in the quarter to shareholders through dividends and share repurchases, and increasing our dividend for the 24th consecutive year,” commented Christopher E. Kubasik, chair and CEO.

“We are well-positioned to support the new administration’s evolving defense priorities, with strategic partnerships at the core of our Trusted Disruptor strategy. Our partners recognize our speed and agility and together we are focused on rapidly delivering mission-critical solutions for our customers. Based on our first quarter performance and the completion of the Commercial Aviation Solutions divestiture, we are updating our guidance while reaffirming our free cash flow commitment,” added Kubasik.

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2025 Outlook lowered: L3Harris now sees revenue of $21.4 billion – $ 21.7 billion (prior $21.8 billion – $22.2 billion) versus estimate of $21.89 billion. Expects adjusted segment operating margin of mid-high 15%.

The company sees adjusted EPS of $10.30 – $10.50 (prior $10.55 – $10.85) against an estimate of $10.61. It projects adjusted cash flow to be between $2.4 billion and $2.5 billion.

The company noted that its guidance has been updated to reflect recent portfolio actions, including a $525 million revenue and margin reduction from the CAS divestiture and a $300 million revenue shift from IMS to AR following the realignment of the FOS business.

Price Action: LHX shares are trading lower by 2.02% at $211.95 premarket at the last check Thursday.

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