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How to Buy L3Harris Technologies Stock (LHX) | The Motley Fool

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  Published in Science and Technology on Wednesday, October 15th 2025 at 15:38 GMT by The Motley Fool
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L3Harris Technologies: A Comprehensive Investment Overview

L3Harris Technologies (NASDAQ: LHX) has emerged as one of the most compelling defense‑technology stocks for investors seeking exposure to a diversified, high‑margin industrial that benefits from long‑term government contracts. The Motley Fool’s article on how to invest in L3Harris breaks down the company’s core business, financial health, and strategic positioning while highlighting the key risks that could weigh on its valuation.

1. Company Snapshot

Founded in 2015 from the merger of Harris Corporation and L3 Technologies, L3Harris now stands as a global provider of advanced electronics and mission‑critical solutions. The company serves a broad range of customers, including the U.S. Department of Defense, law‑enforcement agencies, commercial airlines, and satellite operators. Its product portfolio spans:

• Air, Space & Missile – radar, electronic warfare, and missile‑seeking systems.
• Communications & Cyber – secure voice, data links, and cyber‑defense solutions.
• Integrated Systems & Services – end‑to‑end integration for complex defense missions.
• Space & Intelligence – satellite communication, imaging, and situational awareness tools.

The company’s operating model hinges on recurring revenue streams from long‑term service agreements and an expanding portfolio of high‑margin, highly technical products.

2. Financial Strength and Growth Drivers

Revenue & Margin Growth

In FY 2023, L3Harris reported revenues of $17.2 billion, up 11 % YoY, with a gross margin of 47 %—one of the highest in the defense‑tech sector. Operating income surged to $2.5 billion, reflecting a 12 % increase in operating margin to 14.5 %. The company’s ability to maintain healthy margins is bolstered by:

• Long‑term service contracts: These provide steady cash flow and reduce revenue volatility.
• Technology upgrades: The shift to next‑generation radar and missile‑seeking systems drives premium pricing.
• Geographic expansion: Growing demand from international customers, particularly in Europe and the Middle East, adds diversification beyond U.S. government contracts.

Earnings Power

L3Harris’ earnings per share (EPS) rose from $4.02 in FY 2022 to $4.88 in FY 2023, a 21 % YoY increase. The company’s operating cash flow remains robust, reaching $3.2 billion in 2023, with a strong free‑cash‑flow margin of 15 %. These metrics underscore the company’s ability to fund growth initiatives and return capital to shareholders.

Capital Allocation

The firm has a disciplined capital allocation policy. It returned $1.1 billion to shareholders in 2023 via dividends and share buybacks, while also investing $600 million in R&D and $400 million in acquisitions aimed at strengthening its space and cyber capabilities. Management’s emphasis on balancing shareholder returns with strategic reinvestment positions L3Harris as a company that can continue to generate shareholder value.

3. Strategic Advantages

3.1 Dominant Market Position

L3Harris is the largest defense‑technology firm in the U.S. by revenue, with a significant share of the missile‑seeking and radar markets. Its advanced systems are integral to U.S. military aircraft and naval vessels, creating a natural “lock‑in” effect that secures repeat orders.

3.2 Product Pipeline

The company’s pipeline is rich in high‑margin opportunities, such as:

• Advanced Integrated Radar (AIR) System: Expected to increase U.S. Army radar fleet capability.
• Space‑borne Communications Suite (SCS): Designed to provide resilient communication links for satellite constellations.
• Cyber Defense Platform (CDP): Targeted at protecting critical infrastructure from sophisticated cyber threats.

These products are expected to drive incremental revenue and improve margin over the next five years.

3.3 Strong Customer Relationships

With deep, long‑standing ties to the U.S. Department of Defense and allied governments, L3Harris benefits from a “defense‑contractor” model that offers pricing power and lower cost of customer acquisition. The company’s contractual framework includes “incremental” clauses that allow it to capture additional revenue as customer missions evolve.

4. Risks and Caveats

4.1 Geopolitical and Defense Budget Volatility

While the company’s revenue is heavily weighted toward U.S. government contracts, any reduction in defense spending could impact order flow. A 5 % cut in the Department of Defense budget could translate into a significant revenue dip, especially given the company’s reliance on large multi‑year contracts.

4.2 Competition and Technological Disruption

Key competitors such as Raytheon Technologies, Northrop Grumman, and Boeing are aggressively investing in similar technologies. Rapid advances in autonomous systems, directed‑energy weapons, and satellite communications could erode L3Harris’ market share if it fails to keep pace.

4.3 Supply‑Chain and Production Risks

The defense industry remains exposed to geopolitical tensions that can disrupt supply chains, particularly for semiconductor components and rare earth materials. Any prolonged supply constraints could delay product delivery and affect margins.

4.4 Regulatory Environment

Changes in export control laws and sanctions regimes may limit the company’s ability to sell certain technologies to foreign customers. Additionally, the company’s financial performance is subject to stringent reporting requirements, increasing regulatory compliance costs.

5. Valuation and Investment Thesis

Using a discounted‑cash‑flow (DCF) model calibrated to L3Harris’ historical growth and margin trajectory, the Motley Fool’s analysis suggests a fair‑value range of $145–$165 per share. As of the article’s writing, the stock traded around $125, offering a discount that aligns with the company’s stable cash flows and high margin potential.

The investment thesis hinges on:

• Stable revenue streams from long‑term contracts and high‑margin products.
• Continued innovation in radar, missile‑seeking, and cyber‑defense technologies.
• Strategic acquisitions that expand market reach and product offerings.
• Consistent shareholder returns through dividends and buybacks.

Potential downside, however, includes the risk of defense budget cuts, competition, and supply‑chain disruptions.

6. Conclusion

L3Harris Technologies presents a compelling case for investors looking to tap into a resilient, high‑margin defense‑tech business that is positioned to benefit from sustained U.S. defense spending. Its diversified product mix, robust financials, and strong market position provide a solid foundation for long‑term growth. While the company faces notable risks—particularly from geopolitical shifts and competitive pressures—its disciplined capital allocation and focus on innovation mitigate many of these concerns.

For investors seeking exposure to a leading defense‑technology firm with a track record of delivering consistent cash flow and shareholder returns, L3Harris offers a potentially attractive entry point, especially given its current valuation relative to projected future performance.