L3Harris makes satellites, secure communications, sensors and, since buying Aerojet Rocketdyne, the rocket motors inside U.S. missiles. In the third quarter about $11 billion of missile awards tripled its orders and lifted the backlog to a record $53 billion, but it also cut its 2028 cash target from $3.5 billion to about $3 billion. The shares rose 7% to $278, still well below what the model gives.
Today’s close against the report’s numbers, updated every weekday. The analysis is as of October 30, 2026; the rating as of October 22, 2026. Both change only when the report is revised.
The cash-flow model’s bear-to-bull range, the probability-weighted value, the price and its 52-week range. The copper line marks the base case; the fine dotted line is today’s close.
Written on October 30, 2026, the day after its third-quarter results. Figures are from the company’s filings and releases unless noted. Not investment advice. The author holds LHX shares. Earlier published versions, kept unchanged: October 20, 2026 (Buy, value $436).
L3Harris has three segments. Space & Mission Systems builds satellites, sensors and aircraft systems. Communications & Spectrum Dominance makes tactical radios and electronic warfare equipment, its most profitable unit. Missile Solutions makes solid rocket motors and propulsion for interceptors such as THAAD and PAC-3, a bottleneck for U.S. munitions supply.
In January 2026 the Pentagon committed a $1 billion investment in Missile Solutions ahead of a planned IPO of that business; L3Harris has since pushed the IPO to mid-2027 at the earliest and says it will only go ahead at an attractive valuation.
Third-quarter revenue rose 7% to $6.07 billion, ahead of the $5.92 billion analysts expected, and EPS of $3.28 beat the $2.95 forecast. Orders of $19.3 billion, three times revenue, took the backlog to a record $53.2 billion; about $11 billion of that was PAC-3 and THAAD interceptor work. Missile Solutions grew 17% excluding a business it sold. Free cash flow was $1.26 billion in the quarter (the company no longer counts proceeds from asset sales), and 2026 EPS guidance was raised to $12.25–12.35.
The less welcome news was in the 2028 framework. Growth of about 8% a year was kept, but the segment margin target slipped to about 16% from 16.3% and free cash flow to “$3 billion or more” from $3.5 billion, because the company will pay its 401(k) contributions in cash rather than stock, expects slightly lower margins and is spending faster on missile capacity. The shares rose 7% on the day.
| FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | TTM Jul 2026 | |
|---|---|---|---|---|---|---|
| Revenue | $17.8B | $17.1B | $19.4B | $21.3B | $21.9B | $22.9B |
| Operating margin | 11.8% | 6.6% | 7.3% | 9.0% | 9.6% | 10.1% |
| Net income | $1.8B | $1.1B | $1.2B | $1.5B | $1.6B | $1.9B |
| Operating cash flow | $2.7B | $2.2B | $2.1B | $2.6B | $3.1B | $3.3B |
| Capital spending | $0.3B | $0.3B | $0.4B | $0.4B | $0.4B | $0.5B |
| Free cash flow | $2.3B | $1.9B | $1.6B | $2.2B | $2.7B | $2.8B |
Revenue jumped in 2023 with the Aerojet Rocketdyne purchase. Operating margin on a GAAP basis is held down by amortization of acquired intangibles; cash flow, which adds that back, is the better measure and has grown every year. The FY2025 revenue figure is from the company’s release.
Debt was about $11.0 billion at the start of October against $3.0 billion of cash and short-term investments, mostly from the Aerojet deal; the company plans to repay $800 million in the fourth quarter. It also holds $987 million from the Pentagon’s preferred-stock investment in Missile Solutions, which the model treats like debt. It pays a $1.25 quarterly dividend ($5.00 a year) and management called buybacks “highly attractive” at the current price.
Because GAAP profit understates cash generation, this model works directly from free cash flow to the firm (free cash flow plus after-tax interest), following the company’s own path to 2028. This update follows the lower 2028 cash target and lowers long-run cash flow from 14.6% to 13.5% of revenue: paying the 401(k) in cash and the lower margin are lasting, while the extra missile spending should fade. Lower net debt offsets part of the cut.
| Assumption | Base case | Basis |
|---|---|---|
| Revenue, 2026 | $23.6B | Guidance midpoint |
| Growth, 2027 and 2028 | 7.5% a year | About $27B by 2028, in line with the 8% organic framework |
| Cash flow to the firm | $3.40B, then $3.50B, then 13.5% of revenue | $3B+ free cash flow plus after-tax interest |
| Growth after 2028 | Fades to 3% by year 10 | A straight glide to long-run economic growth |
| Discount rate | 8.0% | Beta 0.80 (defense peers; the measured 0.61 understates risk after this year), about 17% debt |
| Terminal growth | 3.0% | In line with long-run economic growth |
| Bear | Base | Bull | |
|---|---|---|---|
| Growth, 2027 / 2028 | 4% / 3% | 7.5% / 7.5% | 10% / 9% |
| Cash flow, share of revenue | 11.5% | 13.5% | 15% |
| Discount rate | 9.0% | 8.0% | 7.0% |
| Value per share | $215 | $402 | $626 |
| Probability | 25% | 50% | 25% |
Weighted 25/50/25: $411, down from $439 before the results.
| Discount rate | 7.0% | 7.5% | 8.0% | 8.5% | 9.0% |
|---|---|---|---|---|---|
| Value per share | $513 | $450 | $400 | $359 | $325 |
Every figure in this valuation comes from one model script, rerun and checked against this page each time the site is built. The XLSX model rebuilds it in live formulas: change any blue input and every year’s cash flow, the bridge to the value, the scenarios and the sensitivity table recalculate.
| To reach today’s price, you need | Instead of |
|---|---|
| Long-run cash flow of only about 10% of revenue | 13.5%, in line with the new framework |
| Or a discount rate of about 9.9% | 8.0% |
In other words, the price only makes sense if the lowered 2028 cash target is itself badly missed, or defense is treated as far riskier than its contracts suggest.
| Risk | Why it matters |
|---|---|
| Cash conversion | The 2028 cash target was just cut once; missile capacity spending of about $3 billion could run longer or cost more. |
| Execution | About 60 new production buildings and a missile ramp through 2029; fixed-price contracts can bring overruns. |
| Leadership | A new CEO after a conduct-related exit, and shareholder law firms have opened investigations. |
| Budgets | Defense spending depends on Congress; the Missile Solutions IPO depends on markets. |
Upside: the $53 billion backlog, more interceptor orders, buybacks at today’s price, and the Missile Solutions IPO putting a public value on the fastest-growing part of the company.
Third-quarter orders tripled and the backlog is a record $53 billion, but the 2028 cash target was cut from $3.5 billion to about $3 billion. Even on the lower target, the price assumes far less cash than the company plans.
What would change the value: Another cut to the cash outlook, overruns on the missile ramp or new findings from the conduct investigation would lower the value.
Ranges, not three cases. The expected value is the average of 4,000 runs of this report’s own model, with every input drawn from a range: the base case is the middle, and the bear and bull cases are the 10th and 90th percentiles. Business inputs move together; the discount rate moves on its own. The 25/50/25 weighting in the valuation section gives $411. How the ranges work
Two different questions. The rating is relative: it asks whether the stock is cheaper or dearer than the S&P 500 on the same assumptions. The absolute view asks whether it is worth its price at all: on its own the stock trades 43% below our estimated value.
On the same assumptions every report uses (a 5.15% Treasury yield and a 4.5% equity premium), the S&P 500 itself is worth about 68% of its price. The rating compares each stock with that: Buy if it is at least 15% cheaper than the market on this basis, Sell if at least 15% dearer, Hold in between. It is the same rule for every company, whoever owns it. The rating is the same whether the index is assumed to grow 6% or 10% a year. How ratings work
| Measure | L3Harris | Industry median | Rank | |
|---|---|---|---|---|
| Revenue growth, last fiscal year | 9.8% | 10.1% | 7 of 12 | Worse than the median |
| Operating margin | 10.1% | 10.6% | 9 of 12 | Worse than the median |
| Price to earnings | 27.7× | 23.1× | 7 of 12 | Worse than the median |
| Free cash flow yield | 5.4% | 3.0% | 3 of 12 | Better than the median |
Peers: the 11 other S&P 500 companies in Aerospace & Defense with complete data (AXON, BA, GD, GE, HII, HWM, LMT, NOC, RTX, TDG, TXT). Last twelve months where reported, from SEC filings; prices from the latest close. A lower price-to-earnings ratio ranks higher. These figures update with each data run; the rating does not.
The order book is the strongest it has been; the price still reflects doubt about turning it into cash.
Defend this call: the hardest questions about this report, answered from it.
| What | Figures | Source |
|---|---|---|
| Latest results | $6.07B (Revenue, Q3 2026, +7% (+9% organic)), 3.2× (Book-to-bill, on $19.3B of orders), $53.2B (Record backlog, +47% in a year), 15.9% (Segment operating margin) and others | Q3 2026 results, L3Harris; Earnings call; 2028 framework from the slides |
| The numbers (five-year table) | Five years of annual figures and the last twelve months | SEC XBRL company facts; latest: 10-K for the period to 2026-01-02, 10-Q for the period to 2026-07-03 |
| Price at writing | $278.43 (Close, October 29, 2026) | Yahoo Finance; the time of the quote is stated beside the price |
| Discount rate inputs | 10-year Treasury 5.15%, equity risk premium 4.5% | Fixed for every report so they can be compared; How ratings work |
| Valuation | Every value, case and sensitivity | This site’s model: XLSX, CSV |
| Checked by hand | 12 figures on October 23, 2026 | One correction (the dividend), which does not enter the valuation. Audit log |
| Input | Bear (10th percentile) | Base (median) | Bull (90th percentile) |
|---|---|---|---|
| Growth, first forecast year | 4.0% | 7.5% | 10.0% |
| Growth, second forecast year | 3.0% | 7.5% | 9.0% |
| Free cash flow / revenue | 11.5% | 13.5% | 15.0% |
| Discount rate | 9.0% | 8.0% | 7.0% |
| Simulation result | |
|---|---|
| Expected value (average of 4,000 runs) | $398.31 |
| Likely range, 10th to 90th percentile | $262.96 to $538.61 |
| Median | $389.51 |
| Chance the value is above the price | 87% |
| Chance it is cheaper than the S&P 500 | 98% |
Each input is drawn from a split normal: its bear and bull values are the 10th and 90th percentiles, so the two sides can differ. Business inputs share a common factor (correlation 0.6); the discount rate moves on its own. Inputs not listed are held at their base value. How the simulation works.