Breaking Down L3Harris Technologies, Inc. (LHX) Financial Health: Key Insights for Investors

You're looking at L3Harris Technologies, Inc. (LHX) and wondering if the defense giant's recent performance justifies its valuation, and honestly, the numbers from the end of 2025 tell a compelling, if slightly nuanced, story. The company just raised its full-year guidance, now projecting revenue of approximately $22 billion and Non-GAAP Earnings Per Share (EPS) in the range of $10.50 to $10.70 per share, which is a clear signal of confidence in the defense sector's sustained demand. That's a strong tailwind. Plus, the Q3 2025 results showed a robust 10% organic revenue growth and a book-to-bill ratio of 1.2x, driven by $6.7 billion in orders, including a massive $2.2 billion international award for Airborne Early Warning & Control systems. But, to be fair, you need to watch the cash flow: temporary customer payment delays caused a 30% dip in Q3 cash from operations to $546 million, so while the backlog is strong, the timing of getting paid is a defintely a near-term risk.

Revenue Analysis

You want to know where L3Harris Technologies, Inc. (LHX) is actually making its money, and how fast that engine is running. The direct takeaway is this: the company is on track for a strong finish to the year, driven by defense spending and a focused strategy on high-growth areas like space. The updated full-year 2025 revenue guidance is approximately $22 billion, which implies a full-year organic growth rate of 6%.

Honestly, that 6% organic growth is the number to watch, because it strips out the noise from acquisitions and divestitures (like the sale of the Commercial Aviation Solutions business earlier in 2025). This shows the core business is accelerating. For instance, the third quarter of 2025 saw revenue hit $5.7 billion, marking a 10% organic increase year-over-year, which is defintely a robust pace in the defense sector.

Breakdown of Primary Revenue Sources

L3Harris Technologies operates across four major segments, and understanding their contributions is key to forecasting future performance. The core revenue streams are products and services provided to the U.S. Department of Defense, international defense customers, and commercial clients, with a clear pivot toward space and missile defense. The primary revenue sources are products and services, with a strong tilt toward integrated mission solutions and space systems.

Here's the quick math on the segment contributions for the 2025 fiscal year, based on the latest guidance. This breakdown shows the company's reliance on its two largest segments, Space & Airborne Systems and Integrated Mission Systems, which together account for over 60% of the total revenue.

What this estimate hides is the relative growth. Aerojet Rocketdyne, though the smallest segment by revenue, is a major growth driver, with its Q3 2025 revenue increasing by 13%, leading all segments.

Analysis of Revenue Stream Changes and Growth

The biggest change in the L3Harris Technologies revenue picture is the full integration of Aerojet Rocketdyne and the increased focus on high-priority national security programs. The company is actively shedding lower-margin businesses, like the Commercial Aviation Solutions (CAS) divestiture, to focus capital on areas with stronger demand and better margins. This is why the organic growth of 10% in Q3 2025 is so important; it means the remaining, core business is performing exceptionally well.

The growth is not uniform, but it is broad-based across the portfolio. You see clear momentum in a few key areas:

• ISR Classified Programs: Multiple Intelligence, Surveillance, and Reconnaissance (ISR) classified programs are ramping up, driving significant organic growth in the Integrated Mission Systems segment.
• Space and Munitions: Timely investments in space and munitions are paying off, aligned with increasing demand for solid rocket motors and interceptors.
• International Demand: Strong international deliveries and demand are boosting the Communication Systems segment revenue guidance to $5.7 billion.

This strategic shift toward higher-growth, higher-margin defense technology is a long-term positive, but it does mean you'll see some short-term volatility in reported (GAAP) revenue figures due to the divestiture impacts. If you want to dive deeper into the strategic alignment, you can review the Mission Statement, Vision, & Core Values of L3Harris Technologies, Inc. (LHX).

Your next step should be to look at the margin expansion within these segments, as revenue growth without margin improvement is just busy work. Finance: review segment operating margins for IMS and SAS by Friday.

Profitability Metrics

You're looking at L3Harris Technologies, Inc. (LHX) and want to know if the company is actually making money, which is the right question to ask. The short answer is yes, but the more important story is in the improvement of their margins, driven by internal efficiency gains.

For the latest twelve months (TTM) ending September 30, 2025, L3Harris Technologies' core profitability ratios show a solid, if slightly below-peer, performance that is rapidly correcting. This is a company focused on operational upgrades, not just top-line growth. Here's the quick math on the key margins:

• Gross Profit Margin: The TTM figure is approximately 25.6% (based on gross profit of $5.576 billion on revenue of $21.740 billion).
• Operating Profit Margin: This margin stands at about 11.0% (based on operating income of roughly $2.4 billion), indicating a healthy return after covering the cost of goods and all selling, general, and administrative (SG&A) expenses.
• Net Profit Margin: The net margin is approximately 7.9%, reflecting nearly $1.7 billion in net income.

The trend in profitability is what should catch your eye. The net profit margin of 7.9% is a significant jump from the 5.7% reported a year prior, which effectively reverses a five-year annual profit decline. This margin expansion is not accidental; it is a direct result of the company's focus on operational efficiency.

L3Harris Technologies is executing its internal transformation strategy, dubbed LHX NeXt, which is the primary catalyst for these expanding margins. This initiative has already driven substantial cost savings, with the goal now raised to a total of $1.2 billion in cost savings by the end of 2025. This focus on cost management is what's driving the adjusted segment operating margin to expand for its eighth consecutive quarter. Operational efficiency is defintely paying off.

When you compare L3Harris Technologies' profitability to the broader Aerospace & Defense sector, the picture is one of catch-up potential. While the company's gross margin of 25.6% is strong, its current net margin of 7.9% still lags behind some of its major peers. However, analysts forecast this net margin to climb toward 10.8% within the next three years, underscoring the expected impact of the LHX NeXt program. This margin expansion is heavily dependent on the successful execution of those internal cost optimization efforts, rather than just market tailwinds.

Here's how the key margins stack up, with the Operating Margin reflecting the strong operational performance before non-operating items like interest and taxes:

The true test for L3Harris Technologies is maintaining this operational discipline while simultaneously investing in future growth areas like space and munitions, which you can read more about in Mission Statement, Vision, & Core Values of L3Harris Technologies, Inc. (LHX). The company is positioned as an agile defense player, but the financial results must continue to reflect that agility in the form of margin expansion.

Debt vs. Equity Structure

You need to know how L3Harris Technologies, Inc. (LHX) funds its growth, because a company's debt load dictates its flexibility and risk, especially in a capital-intensive sector like Aerospace & Defense. The direct takeaway is that L3Harris Technologies, Inc. is using a moderate amount of financial leverage, but its 0.60 Debt-to-Equity (D/E) ratio is higher than the industry average, which suggests a more aggressive capital structure.

As of the quarter ending September 2025, L3Harris Technologies, Inc.'s balance sheet shows a clear reliance on equity over debt, though the total debt is defintely significant. The company's Long-Term Debt and Capital Lease Obligation stood at $10,997 million, with a much smaller Short-Term Debt and Capital Lease Obligation of $725 million. This brings the total debt to approximately $11,722 million.

Here's the quick math: with Total Stockholders' Equity at $19,532 million, the Debt-to-Equity ratio is 0.60.

• Total Debt (Sep 2025): $11,722 million
• Total Equity (Sep 2025): $19,532 million
• Debt-to-Equity Ratio: 0.60

To be fair, a D/E ratio of 0.60 is generally considered healthy, meaning the company has 60 cents of debt for every dollar of shareholder equity. But, when we compare this to the broader Aerospace & Defense industry, where the average D/E ratio is closer to 0.38, L3Harris Technologies, Inc.'s leverage posture is notably higher. This higher leverage is a calculated move, often used to fund strategic acquisitions and share buybacks, which you can read more about in their strategic goals here: Mission Statement, Vision, & Core Values of L3Harris Technologies, Inc. (LHX).

The management team is actively balancing this debt. Following major acquisitions in 2023, the priority has been debt reduction. In March 2025, S&P Global Ratings affirmed L3Harris Technologies, Inc.'s long-term credit rating at 'BBB' with a stable outlook. This investment-grade rating is crucial; it confirms that credit rating agencies view their debt as manageable and their ability to service it as strong, even with the elevated post-acquisition levels.

They are using a mix of debt financing (like their senior unsecured notes) and equity funding (retained earnings and stock) to manage their capital structure. The goal is to use debt strategically to enhance shareholder returns-financial leverage-without letting interest payments eat too much into operating profit. This is a common tightrope walk for large defense contractors.

What this estimate hides is the company's strong cash flow generation, which is the real engine for debt repayment. Finance: keep tracking their quarterly free cash flow against the $600 million in debt that was maturing in 2025.

Liquidity and Solvency

You need to know if L3Harris Technologies, Inc. (LHX) can cover its near-term bills, and the short answer is yes, but its liquidity ratios are tight-a typical pattern for a defense contractor. The real strength here isn't in the balance sheet's immediate snapshot, but in the company's strong, predictable cash generation from operations.

For the trailing twelve months (TTM) ending in late 2025, L3Harris Technologies, Inc.'s Current Ratio sits at approximately 1.04. This means the company has just about $1.04 in current assets (cash, receivables, inventory) for every $1.00 in current liabilities (bills due within a year). The Quick Ratio (which strips out inventory, a less liquid asset) is even tighter at around 0.87. Honestly, a Quick Ratio below 1.0 is a yellow flag for most companies, but for a defense giant with massive government contracts, it's often a structural reality. That inventory is highly specialized and its receivables are from the U.S. government-defintely good credit.

Working Capital and Cash Flow Dynamics

The tight ratios lead directly to the working capital picture. Working capital is current assets minus current liabilities, and a low ratio suggests a lean operation. This is where you need to look past the ratio to the cash flow statement. The company's management is focused on operational improvements through its LHX NeXt initiative, which aims to achieve $1.2 billion in cost savings by the end of 2025. This focus helps manage the working capital cycle, even with the tight ratios.

Here's the quick math on their cash generation for the 2025 fiscal year:

• Operating Cash Flow (CFO): Expected to be approximately $2.65 billion. This is the lifeblood of the business, showing strong core profitability.
• Investing Cash Flow (CFI): Approximately $-263 million. This negative number reflects capital expenditures (CapEx) to maintain or expand the business, which is healthy.
• Financing Cash Flow (CFF): Approximately $-2.22 billion. This is a significant outflow, largely due to debt repayment and returning capital to shareholders via dividends and buybacks.

The key takeaway is the robust Operating Cash Flow, which is projected to be strong enough to cover both CapEx and a substantial return of capital to investors. The company's strong cash flow guidance of approximately $2.65 billion for Free Cash Flow (FCF) in 2025 is a powerful indicator of financial health, even if the liquidity ratios look a little thin. This strong FCF generation is what funds the commitment to return all excess cash to shareholders and pay down debt, which is a clear, actionable signal for investors. If you want a deeper dive into who is betting on this cash flow, check out Exploring L3Harris Technologies, Inc. (LHX) Investor Profile: Who's Buying and Why?

Liquidity Strengths and Risks

The primary strength is the quality of L3Harris Technologies, Inc.'s receivables, which are largely government-backed, and the sheer volume of cash from operations. The main risk, as briefly highlighted in the Q3 2025 results, is the susceptibility to temporary customer payment delays, which caused a short-term drop in cash flow from operations, though the full-year guidance remains confident. The company's liquidity position is less about having a huge cash hoard and more about having a predictable, high-volume cash flow engine.

Valuation Analysis

You're looking at L3Harris Technologies, Inc. (LHX) and asking the essential question: is the stock priced fairly, or are we staring at a value trap or a hidden gem? The direct takeaway is that L3Harris Technologies is currently trading at a premium to the broader market on a trailing basis, but its forward-looking metrics suggest a more reasonable, though still elevated, valuation.

As a seasoned defense and aerospace contractor, L3Harris Technologies commands a valuation that reflects its stable government contracts and critical technology portfolio. But we need to check the math. As of November 2025, the stock's valuation multiples tell a story of investor confidence, but also of high expectations for future earnings growth.

Here's the quick math on key valuation ratios, using data from the 2025 fiscal year:

• Price-to-Earnings (P/E) Ratio: The trailing twelve-month (TTM) P/E ratio is around 30.70. Honestly, this is high compared to the S&P 500's long-term average, suggesting the stock is expensive based on past earnings.
• Forward P/E Ratio: Looking ahead, the forward P/E drops to approximately 24.40. This is a defintely better number, signaling that analysts expect earnings to grow and bring the multiple down to a more palatable level.
• Price-to-Book (P/B) Ratio: The P/B ratio stands at 2.73. This means you are paying nearly three times the company's net asset value, which is typical for a technology-heavy, asset-light defense firm.
• Enterprise Value-to-EBITDA (EV/EBITDA): This metric, which is better for comparing companies with different debt levels, is around 15.91. This is also on the higher end for the sector, pointing to a premium valuation for the company's operating cash flow.

The stock is not cheap. It's a classic growth-at-a-reasonable-price (GARP) candidate, but you're paying for that future growth today.

Stock Performance and Analyst Sentiment

You should also consider how the market has actually treated L3Harris Technologies over the past year. The stock has been on a solid run, reflecting positive sentiment around global defense spending. Over the last 12 months leading up to November 2025, the stock is up 12.64%. That's a good return, but it also creates a higher base for future gains.

The stock's range in the last 52 weeks shows significant volatility: the 52-week high was $308.12, reached in October 2025, and the 52-week low was $193.09 in February 2025. The recent closing price of approximately $277.78 sits comfortably between these extremes, but closer to the high, which reinforces the premium valuation thesis.

Wall Street's consensus on L3Harris Technologies is a solid Moderate Buy. This consensus comes from 20 analysts, with 12 Buy ratings and 8 Hold ratings, and importantly, zero Sell ratings. The average 12-month price target is $295.29, suggesting a modest upside of about 6.34% from the current price. What this estimate hides is the potential for a major contract announcement, which could easily push the stock past the high target of $353.00. Mission Statement, Vision, & Core Values of L3Harris Technologies, Inc. (LHX).

Dividend Health Check

For income-focused investors, L3Harris Technologies offers a reliable, though not high, dividend. The company has a history of increasing its payout, which speaks to its financial stability. As of late 2025, the annualized dividend per share is approximately $4.80. This translates to a dividend yield of about 1.73%.

The dividend payout ratio is a healthy 51.11%. This is a crucial number because it shows the company is paying out about half of its earnings as dividends, leaving the other half for reinvestment in the business or for share buybacks. A payout ratio around 50% is a sweet spot: it's high enough to be meaningful to shareholders, but low enough to be sustainable and allow for future dividend growth, plus still fund their capital expenditure needs.

Risk Factors

You're looking at L3Harris Technologies, Inc. (LHX) because it's a defense sector powerhouse, and for good reason-they just raised their full-year 2025 revenue guidance to approximately $22 billion. But in this business, your biggest opportunities are often tied to your biggest risks. The core of L3Harris's financial health hinges on government spending, which is never a straight line.

The near-term risks aren't about demand; the company's Q3 2025 orders were strong at $6.7 billion, giving them a healthy 1.2x book-to-bill ratio. The real risks are execution and political volatility. You need to watch three main areas: the government's budget process, operational bottlenecks, and the execution of their own strategic overhaul.

External and Geo-Political Risks

The primary external risk for L3Harris Technologies, Inc. is its deep dependence on the U.S. Government, which accounts for the vast majority of its revenue. Any shift in U.S. Government spending priorities or changes in contract mix-say, a pivot away from certain legacy systems-can impact their backlog and future revenue. This is the single biggest external factor. Plus, geo-political events, while driving demand, also introduce risk, especially around foreign military sales and export-license-driven programs, which can see delays, particularly if a U.S. government shutdown occurs.

• U.S. Government Budget Volatility: Unilateral contract action or a government shutdown can delay awards and cash collection.
• Competitive Markets: They face intense competition from primes like Lockheed Martin and Northrop Grumman, which pressures margins on new contracts.
• Inflation and Tariffs: Macroeconomic factors like inflation and potential trade disputes increase the cost of materials and labor, squeezing fixed-price contracts.

Operational and Financial Risks

On the operational side, the biggest immediate financial risk we saw in Q3 2025 was a dip in cash flow. Cash From Operations decreased 30% to $546 million, and Adjusted Free Cash Flow fell 38% to $449 million, primarily due to temporary customer delays in payment. This isn't a long-term solvency issue, but it's a working capital headache. Supply chain disruptions are still a persistent issue, slowing down production and increasing costs, a common theme across the defense sector. Plus, L3Harris's significant indebtedness and defined benefit plan liabilities are always on the balance sheet, sensitive to interest rates and market returns.

Here's the quick math on the cash flow hiccup:

What this estimate hides is the potential for these delays to become structural if government payment cycles lengthen. That's a cash-conversion risk you defintely need to track.

Strategic Risks and Mitigation

The company is in the middle of a massive internal overhaul called LHX NeXt, a strategic initiative designed to drive operational efficiencies and cost savings. While this program is a mitigation strategy in itself-it contributed to margin expansion and delivered $800 million in cost savings in fiscal 2024-its failure to execute or its impact on culture and program performance is a strategic risk. They are betting on this transformation to hit their 2026 financial framework targets.

The mitigation strategy is clear: double down on what they call the 'Trusted Disruptor' strategy, focusing on high-growth, high-margin areas like space and munitions, and using the LHX NeXt savings to offset external cost pressures. Their full-year 2025 adjusted EPS guidance of $10.50 to $10.70 suggests management is confident the cost-saving benefits will outweigh the risks. For a deeper dive into what drives their long-term focus, you should review their Mission Statement, Vision, & Core Values of L3Harris Technologies, Inc. (LHX).

Growth Opportunities

You need to know where the next dollar of growth is coming from, and for L3Harris Technologies, Inc. (LHX), it's a clear map of cost discipline meeting global defense demand. The company's updated full-year 2025 guidance projects revenue of approximately $22 billion, an increase from prior expectations, driven by strong program execution and a growing international footprint.

This isn't just about big government contracts; it's about operational efficiency and smart acquisitions paying off. The core growth drivers are concentrated in high-priority national security areas, plus a significant push for margin expansion. You can see the full picture of the investor base and their motivations in Exploring L3Harris Technologies, Inc. (LHX) Investor Profile: Who's Buying and Why?.

Key Growth Drivers and Product Innovations

L3Harris Technologies, Inc. is positioning itself as a 'Trusted Disruptor,' focusing on speed and mission-critical solutions. The biggest near-term driver is the successful integration of its Aerojet Rocketdyne acquisition, which is fueling growth in missile solutions and space propulsion. The company is backing this up with real capacity investments, like breaking ground on the Arkansas Advanced Propulsion Facilities (AAPF) to increase solid rocket motor (SRM) manufacturing capacity by six-fold.

International demand is also a major tailwind, particularly for resilient communication equipment. We've seen awards from NATO allies like Germany and the Czech Republic for software-defined radios and missionized business jets. Plus, new program ramps are now converting into revenue:

• Missile Defense: Programs like the Glide Phase Interceptor (GPI) and increased production volumes across key missile systems.
• Space Systems: Deploying the constellation of 40-45 HBTSS satellites for the Golden Dome initiative, a significant win in missile tracking.
• Electronic Warfare: Continued work on programs such as the Next Generation Jammer.

Future Projections and Strategic Initiatives

The financial targets for 2025 reflect this momentum. The updated full-year 2025 revenue guidance of approximately $22 billion represents a full-year organic growth of 6%. Here's the quick math on profitability: the company raised its non-GAAP Earnings Per Share (EPS) forecast to a range of $10.50 to $10.70. That's a defintely strong signal of confidence in their execution.

The margin story is tied directly to the LHX NeXt program, a major strategic initiative focused on operational excellence. This program is driving cost savings, with a target of $1.2 billion in cumulative cost savings by 2026, up from $800 million realized in 2024. This is why the adjusted segment operating margin is expected to be in the high 15% range for 2025, a key driver for that EPS growth.

Competitive Advantages

L3Harris Technologies, Inc.'s competitive edge is its diversified, yet focused, portfolio across space, air, land, sea, and cyber domains. The successful integration of Aerojet Rocketdyne gives them a unique position in the missile and space propulsion market, which is seeing unprecedented demand. Also, the strategic partnership with Palantir Technologies is a smart move, integrating advanced Artificial Intelligence (AI) and Machine Learning (ML) into their defense operations to enhance efficiency and new product development. This combination of a broad product portfolio and focused technology integration makes them a formidable player in the global defense market.