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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LHXL3Harris Technologies Inc
$216.410.06%

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