BofA Securities analyst Ronald J. Epstein upgraded L3Harris Technologies, Inc. (NYSE:LHX) to Buy from Neutral and raised the price target to $300 from $240.
The analyst writes that L3Harris introduced its transformation initiative, "LHX Next," which he initially viewed with cautious optimism.
However, recent results have reinforced our positive outlook, showing that the streamlined, focused LHX is now better positioned to fulfill its commitments and exceed expectations, says the analyst.
Moreover, Ronald says that the missile and munitions industry consensus is clear: demand is relentless, with a promising outlook extending over the next five years.
LHX is well-positioned to capitalize on this trend, standing out as one of the few companies with solid rocket motor (SRM) production capabilities.
LHX's recent wins, including contracts for the Next-Gen Interceptor (NGI) and as the primary provider for the 1st and 3rd stage propulsion on the Glide Phase Interceptor (GPI), underscore the strength and reliability of its products, adds the analyst.
Notably, last week, the company announced a strategic partnership with Palantir Technologies Inc. (NYSE:PLTR) to combine Palantir's Artificial Intelligence Platform with L3Harris' sensor and software-defined systems.
The analyst writes that this partnership reflects a forward-thinking and strategic move by LHX, leveraging Palantir's enterprise AI-driven data integration to enhance cost efficiency, gain greater supply chain visibility, and enable quicker, more informed decisions.
Additionally, the collaboration supports AI-enabled product development, aligning LHX's focus on core capabilities with Palantir's software expertise—a combination we view as a strong foundation for future growth, adds the analyst.
The analyst adds that the company surpassed its $400 million run-rate savings target for 2024 and now expects to achieve $600 million by year-end, bolstering confidence in its $1 billion savings target.
Consequently, Ronald raised the estimates, with 2026E free cash flow (FCF) now projected at $2.8 billion and potential for additional upside.
Investors can gain exposure to the stock via XAR (NYSE:XAR) and iShares U.S. Aerospace & Defense ETF (BATS:ITA).
Price Action: LHX shares are up 0.57% at $246.81 at the last check Thursday.
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