DoD Budget Supports Top-Line Outlook For L3Harris, Says This Analyst

RBC Capital analyst Ken Herbert initiated coverage on L3Harris Technologies, Inc LHX with an Outperform rating and a price target of $285 (23% upside).
He believes the DoD budget supports a ~6% organic top-line outlook for LHX, ahead of other primes.
LHX has taken a more platform-agnostic approach and benefits as the focus remain on modification and upgrades.
Its Communications segment will likely determine 2H22 results, but a recovery here should help offset supply chain risks and concerns about the exposure to the radio market.
He believes capital allocation can be a catalyst, and management's focus and urgency will be positive.
He believes the management remains focused on organic growth. Still, after its ~$2 billion in divestitures since the 2019 business combination, it appears poised to continue identifying niche market opportunities that can support its growth strategy.
LHX is his highest conviction defense prime into 2023 as he expects top-line outperformance off a higher margin base to be a positive catalyst.
Investor's confidence in the company's expected 2H22 acceleration appears low, which he believes creates a favorable setup.
He believes the supply chain will remain a headwind, but the potential inflection in 2H22 sales creates a favorable risk-reward.
Price Action: LHX shares traded lower by 0.50% at $232.11 on the last check Tuesday.

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