Boosted by its success in supporting the booming space economy, L3 Harris (LHX) reported very impressive second-quarter financial results. Moreover, the company looks poised to benefit tremendously from the Golden Dome project and the continued expansion of global space initiatives.
Finally, there’s evidence that the Street is becoming more interested in buying LHX stock, and the shares’ valuation is quite attractive at their current levels. In light of all of these points, I believe that investors looking for increased exposure to large defense stocks should consider L3’s shares.
Strong Q2 Results
By many metrics, L3Harris delivered excellent Q2 results on July 24. The company’s operating income jumped 20% versus the same period a year earlier to $571 million, while its operating margin advanced to 10.5% from 9%. Additionally, the firm’s revenue, excluding acquisitions and divestments, climbed 6% year-over-year, and it generated record orders of $8.3 billion. Also impressive is the fact that the ratio of its orders to its billing reached 1.5 last quarter, suggesting that its top and bottom lines are poised to surge in the coming quarters.
One big contribution to the company’s orders was the strong demand for its solid rocket motors. Indeed, calling the demand for these products “urgent,” CEO Christopher Kubasik noted that the company was investing in boosting the production of these products. “We’re not waiting; we’re responding to the clear demand signals and delivering now,” the CEO stated, referring to L3’s decision to increase its production of rocket motors.
Also noteworthy is that L3 obtained a deal worth almost $850 million to supply 130 of its upper stage RL 10 engines. These engines have been used to power “military, government and commercial spacecraft,” and today they are being incorporated into United Launch Alliance’s (ULA) Atlas V and Delta IV Heavy rockets.
The company also received other, major deals involving its high tech products. Specifically, it agreed to sell its software-defined radio systems to Germany and the Czech Republic, and it “is nearing initial deliveries on the first four AI-defined vehicles equipped with…common data links…secure SATCOM, and tactical multidomain waveforms.” According to Kubasik, this technology will allow “the army to process targeting data faster and more effectively on the battlefield.”
L3’s strong showing in space and other high-tech areas is a key reason that it expects “consistent top-line growth with industry-leading margins and increasing free cash flow per share” going forward.
Golden Dome and the Expansion of Space Initiatives
L3 ‘s financial results appear set to be boosted a great deal by the Trump administration’s $175 billion Golden Dome initiative. That’s because the company has products that can “detect hypersonic threats,” according to Kubasik, who stated earlier this year that it has “the only proven on orbit system capable of tracking Iran’s new hypersonic missiles.” And the CEO indicated that L3 was preparing to provide “40 to 45 proven HVTSS satellites” that will be utilized by Golden Dome. Finally, the company’s “ground-based…propulsion and divert and attitude control systems support nearly every U.S. interceptor program in development or production,” Kubasik noted. Consequently, there’s a high likelihood that these systems will be utilized by Golden Dome.
The Republicans’ recently enacted budget reconciliation law, for example, includes almost $14 billion for R&D by the Space Force and $1 billion for the Space Force’s X-37B spaceplane. What’s more, between the reconciliation law and the Pentagon’s fiscal 2026 budget request, the Space Force’s total spending would jump a total of 40%, or $11.3 billion, versus the previous year. And Gartner, the well-respected tech research firm, predicts that “end user spending on low Earth orbit (LEO) satellite communications services is expected to reach $14.8 billion globally in 2026, an increase of 24.5% from 2025.”
In light of the fact that L3 has strong rocket motor and rocket engine businesses, it should be a big beneficiary of the large, upcoming increases in spending on space-based systems.
The Street’s Increased Interest and an Attractive Valuation
In the three months that ended on August 1, LHX stock advanced 27%, suggesting that the Street has been becoming much more fond of the shares in recent weeks.
As of August 1, LHX has a forward price-earnings ratio of 26.9. That’s a very attractive valuation, given the company’s impressive Q2 results and its positive outlook.
*This article is intended to be informational only; it is not financial advice.
