LHX Financial Analysis

Analysis Date: 1/31/2025

Business Model

L3Harris generates revenue primarily through four segments: Space & Airborne Systems (SAS), Integrated Mission Systems (IMS), Communication Systems (CS), and Aerojet Rocketdyne (AR)

Revenue Sources

• Space & Airborne Systems: $6,869M (32% of 2024 revenue)
• Integrated Mission Systems: $6,842M (32% of 2024 revenue)
• Communication Systems: $5,459M (26% of 2024 revenue)
• Aerojet Rocketdyne: $2,347M (11% of 2024 revenue)

Revenue Distribution by Channel

• US Government/DoD represents majority of revenue

Income Statement Analysis

• Revenue grew 3.4% YoY to $5.5B driven by growth in IMS and CS segments
• Operating margin expanded 740bps to 10.3% on improved program performance and cost savings
• Net income increased 262% YoY to $456M

Balance Sheet Analysis

• Total assets increased 0.8% to $42B
• Cash position strengthened with 9.8% increase to $615M
• Total liabilities decreased 1.9% while equity increased 4.0%

Cash Flow Analysis

• Operating cash flow increased 43.1% to $1.1B on stronger earnings and working capital management
• Free cash flow increased 37% to $1.0B in Q4 2024

Capital Allocation

Capital allocation priorities include: 1) Investment in business with capex ~2% of revenue, 2) Competitive dividend with 23 consecutive years of increases and 35-40% FCF payout target, 3) Share repurchases with $3.4B authorization remaining. Company achieved 3.0x net leverage target.

Management Commentary

Delivered on financial commitments for 2024 with record backlog positioning well for future

Exceeded LHX NeXt cost savings target, achieving $800M in 2024

Raising cost savings goal to $1.2B by end of 2025, a year ahead of schedule

Monitoring potential impacts from continuing resolution and new executive orders

Overall Sentiment: Positive with strong execution on financial and operational goals while managing through policy uncertainties

Recommendation

Rating: Buy

Reason for Rating: Strong execution, margin expansion, and clear path to meeting 2026 targets support positive outlook

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/31/2025, 12:30:46 PM