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L3Harris Technologies, Inc. is a defense industry leader known as the "Trusted Disruptor," providing comprehensive technology solutions across space, air, land, sea, and cyber domains . The company primarily serves government customers in over 100 countries, with the U.S. Government being its largest customer . L3Harris operates through four main segments: Space & Airborne Systems, Integrated Mission Systems, Communication Systems, and Aerojet Rocketdyne, offering a range of products from space payloads to missile solutions .
- Integrated Mission Systems (IMS) - Focuses on intelligence, surveillance, reconnaissance systems, passive sensing, targeting, and electronic attack, with a significant portion of revenue from international markets .
- International Revenue Growth - Expected to increase from 25% to 30% over the next three years .
- Space & Airborne Systems (SAS) - Includes space payloads, sensors, avionics, electronic warfare, and mission networks, contributing significantly to the company's operations .
- Communication Systems (CS) - Provides tactical communications, broadband solutions, and public safety radios .
- Aerojet Rocketdyne (AR) - Offers missile solutions and space propulsion systems .
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With increasing competition in the solid rocket motor market, especially for GMLRS, how do you plan to maintain or grow your market share, and what specific steps are you taking to address capacity constraints and competitive pressures?
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You aim to achieve at least a 16% segment operating margin by 2026; what are the primary risks that could prevent you from reaching this target, especially in the lower-margin sectors, and how do you plan to mitigate them?
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Given past supply chain challenges in your software-defined radio business, what measures have you implemented to ensure supply chain resilience, and how confident are you that similar issues won't resurface?
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With approximately 300,000 radios remaining in the DoD modernization cycle and competition from other providers, how do you plan to maintain your current market share, and what risks do you see in achieving your targets both domestically and with NATO countries?
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Regarding the ENVG night vision goggle program, considering past funding inconsistencies and potential shifts towards augmented reality systems, how confident are you in the sustainability of this business, and what strategies do you have to address potential risks?
Competitors mentioned in the company's latest 10K filing.
- BAE Systems, Boeing, General Dynamics, Lockheed Martin, Northrop Grumman, RTX; Thales; and non-traditional defense contractors .
Recent developments and announcements about LHX.
Financial Reporting
- Revenue: $21.3 billion, a 10% increase year-over-year, with 4% organic growth.
- Segment Operating Margin: 15.4%, reflecting cost savings and strong execution.
- Non-GAAP EPS: $13.10.
- Free Cash Flow: $2.3 billion, up 14% due to earnings growth and effective working capital management.
- Q4 Performance:
- Revenue: $5.5 billion, up 4% organically.
- Non-GAAP EPS: $3.47.
- Free Cash Flow: Over $1 billion.
- SAS (Space and Airborne Systems): Revenue of $1.7 billion, down 4% year-over-year due to the divestiture of the antenna business and lower F-35 volumes. Operating margin improved to 10.8%.
- IMS (Integrated Mission Systems): Revenue of $1.8 billion, up 9%, with a margin of 13.4% driven by strong program execution.
- CS (Communication Systems): Revenue of $1.4 billion, up 5%, with a margin of 24.4%, supported by demand for resilient communications equipment.
- Aerojet Rocketdyne: Revenue grew 5%, with an operating margin of 11.5%, supported by solid rocket motor production.
- Revenue: $21.8 billion to $22.2 billion, representing 4% organic growth at the midpoint.
- Segment Operating Margin: Mid- to high 15% range.
- Free Cash Flow: $2.4 billion to $2.5 billion.
- Non-GAAP EPS: $10.55 to $10.85, reflecting 10% growth at the midpoint.
- Segment Projections:
- SAS: Revenue of $6.9 billion to $7.1 billion, with margins in the low 12% range.
- IMS: Revenue of $7 billion to $7.2 billion, with margins in the low 12% range.
- CS: Revenue of $5.6 billion to $5.7 billion, with margins in the high 24% range.
- Aerojet Rocketdyne: Revenue of approximately $2.5 billion, with margins in the mid-12% range.
- LHX NeXt Program: Achieved $800 million in cost savings in 2024, with a target of $1.2 billion by the end of 2025. This initiative is driving margin expansion and operational efficiency.
- International Growth: Strong demand from NATO allies and other international markets, with international revenue expected to grow faster than domestic revenue.
- AI and Partnerships: Collaborations with companies like Palantir to integrate AI-enabled solutions and emerging technologies.
- Space and Defense: Continued focus on space-based capabilities, missile defense, and advanced munitions.
- Revenue Growth and Cost Savings: Management highlighted that cost savings from the LHX NeXt program could act as a headwind to revenue growth in cost-plus programs but are expected to drive long-term profitability.
- Space Program Challenges: Management acknowledged risks in certain fixed-price development programs but expressed confidence in mitigating these risks by 2025.
- International Opportunities: Significant demand across NATO allies and Asia-Pacific regions, with international revenue expected to grow as a percentage of total revenue.
- M&A Environment: Management is open to bolt-on acquisitions to expand capabilities but is currently focused on organic growth and partnerships.
- Fourth Quarter 2024 Revenue: $5.5 billion, a 3% increase year-over-year, driven by growth in Integrated Mission Systems (IMS) and Communication Systems (CS) segments.
- Full-Year 2024 Revenue: $21.3 billion, up 10% year-over-year, with 4% organic growth.
- Fourth Quarter GAAP Diluted EPS: $2.37, a 186% increase year-over-year.
- Fourth Quarter Non-GAAP Diluted EPS: $3.47, a 4% increase year-over-year.
- Full-Year Non-GAAP Diluted EPS: $13.10, a 6% increase year-over-year.
- Adjusted Free Cash Flow (2024): $2.3 billion, a 14% increase year-over-year.
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Space & Airborne Systems (SAS):
- Q4 Revenue: $1.73 billion, a 4% decline due to the divestiture of the antenna business and lower F-35-related volume.
- Operating Margin: Increased by 20 basis points to 10.8% in Q4, driven by cost savings and growth in FAA safety of flight networks.
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Integrated Mission Systems (IMS):
- Q4 Revenue: $1.77 billion, a 9% increase due to higher aircraft missionization volume and demand for advanced electronics.
- Operating Margin: Increased by 1,800 basis points to 13.4% in Q4, reflecting improved program performance and cost savings.
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Communication Systems (CS):
- Q4 Revenue: $1.44 billion, a 5% increase driven by strong demand for tactical radios and night vision devices, particularly from NATO countries.
- Operating Margin: Decreased by 340 basis points to 22.7% in Q4 due to a higher mix of domestic radios and asset impairments.
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Aerojet Rocketdyne (AR):
- Q4 Revenue: $628 million, a 5% increase due to higher production volumes in missile programs.
- Operating Margin: Increased by 40 basis points to 11.5% in Q4.
- Record Backlog: $34 billion, reflecting strong demand across all domains.
- Cost Savings: Achieved $800 million in savings through the LHX NeXt initiative in 2024, with a revised target of $1.2 billion by the end of 2025.
- Cash Flow: Fourth quarter cash from operations increased by 43% to $1.1 billion, driven by tax planning strategies and reduced working capital needs.
- Revenue: Expected to range between $21.8 billion and $22.2 billion, with mid-to-high 15% adjusted segment operating margins.
- Non-GAAP Diluted EPS (New): Projected at $10.55 to $10.85, reflecting a 10% growth at the midpoint.
- Adjusted Free Cash Flow: Anticipated to be between $2.4 billion and $2.5 billion.
Earnings Call
L3Harris (LHX) has recently released its earnings call transcript, providing key insights into its financial performance and strategic initiatives for 2024 and guidance for 2025. Below is a summary of the key points:
Financial Performance (2024)
Segment Highlights (Q4 2024)
2025 Guidance
Strategic Initiatives and Market Conditions
Analyst Questions and Management Responses
Key Takeaways
L3Harris demonstrated strong financial performance in 2024 and has set ambitious targets for 2025. The company is leveraging cost-saving initiatives, international opportunities, and strategic partnerships to drive growth. Challenges in space programs and the impact of cost-saving measures on revenue growth were acknowledged but are being actively managed. The company remains well-positioned to capitalize on evolving defense priorities and market conditions.
For further details, refer to the full earnings call transcript and supplemental materials provided by L3Harris.
Earnings Report
L3Harris Technologies (LHX) Fourth Quarter and Full-Year 2024 Earnings Results
L3Harris Technologies has released its fourth quarter and full-year 2024 financial results as of January 30, 2025. Below are the key highlights and trends from the earnings report:
Key Financial Metrics
Segment Performance
Operational Highlights
2025 Guidance
CEO Commentary
Christopher E. Kubasik, Chair and CEO, emphasized the company’s agility and alignment with customer priorities, stating, “We are confident in our ability to sustain profitable growth and drive long-term value for our stakeholders”.
Conclusion
L3Harris Technologies demonstrated strong financial performance in 2024, with significant growth in revenue, earnings, and cash flow. The company’s focus on operational efficiencies and strategic initiatives positions it well for continued success in 2025.
For further details, refer to the full earnings release and accompanying financial tables.
Corporate Leadership
Board Change
General (ret.) Peter W. Chiarelli has notified the Board of Directors of L3Harris Technologies, Inc. that he will retire at the end of 2024. He will not stand for re-election at the next annual meeting due to the company's retirement policy. His decision is not due to any disagreement with the company's operations, policies, or practices.