L3Harris Technologies (LHX) Highlighted as Top Pick for Defense Companies at Jefferies

Jefferies analyst Sheila Kahyaoglu reiterated a Buy rating and $320.00 price target on L3Harris Technologies (NYSE: LHX) highlighting the company as the firm's top pick in Defense for 3 reasons:

1) peer-leading 3.7% organic top-line CAGR through 2024E driven by positioning in space, radios, and classified budgets
2) differentiated margin expansion w/ 120 bps of expansion vs peers at 60 bps
3) peer-leading FCF/sh growth (9% vs 3%) led by strong FCF conversion (FY21 104% adj) and WC improvement. Shares trade at a 6.1% 2023 FCF yield vs the peer group avg of 5.2%.

The analyst stated "LHX's segment margin profile already leads peers (16% vs 11% peer avg) and is positioned to drive another 70 bps of expansion through 2024 on our ests, or 40 bps of adj EBIT margin expansion vs peer avg -80 bps. The co's realized merger synergies of $350MM, or ~200 bps of savings, and ability to drive add'l productivity improvements through the adoption of AI/ML in its e3 program is a key differentiator to offset supply chain/labor challenges experienced across the group. e3 is expected to save 20-30 bps annually, which should offset a portion of inflationary pressures in 2022 through its levers in productivity and facility rationalization."

For an analyst ratings summary and ratings history on L3Harris Technologies click here. For more ratings news on L3Harris Technologies click here.

Shares of L3Harris Technologies closed at $251.81 yesterday.

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