On Thursday, Raymond (NS:RYMD) James made a significant adjustment to its outlook on L3Harris Technologies (NYSE:NYSE:LHX), downgrading the defense contractor's stock rating from Outperform to Market Perform. The shift in rating comes amid concerns about the company's future bookings and recent performance trends. With a market capitalization of $39.88 billion, L3Harris is trading near its 52-week low, and according to InvestingPro analysis, technical indicators suggest the stock is in oversold territory.
The research firm acknowledged L3Harris Technologies' effective management and the notable success of its NeXt initiative, which has exceeded expectations in both scale and timing. While Raymond James believes these accomplishments have already been factored into the stock's current valuation, the company has demonstrated strong financial performance with revenue growth of 13.32% in the last twelve months. InvestingPro data reveals that net income is expected to grow this year, though the stock currently trades at a relatively high P/E ratio of 32.84.
Analysts at Raymond James pointed to the company's recent bookings trends, which they perceive as having more potential downside than upside in the upcoming quarters. Despite a recovery in the business-to-business (B2B) bookings ratio in the third quarter of 2024, to 1.4 times compared to previous quarters of 1.0 and 1.1 times, there is a concern that the change in administration could introduce customer uncertainty. This uncertainty might impact the B2B ratio as the final quarter of 2024 concludes, potentially affecting visibility and enthusiasm for 2025.
Additionally, Raymond James observed that L3Harris Technologies' profit and loss (P&L) outperformance has been primarily driven by its Integrated Mission Systems (IMS) segment. This segment is considered to carry the lowest sum-of-the-parts (SOTP) multiple and is deemed the least essential to the company's core operations.
The analyst's assessment also highlighted that the company's backlog growth has reached its lowest point in seven quarters. The firm anticipates this trend to continue, facing challenging comparisons through late-2025. This perspective contributes to the more cautious stance taken by Raymond James on L3Harris Technologies' stock. For investors seeking deeper insights, InvestingPro offers comprehensive analysis with 12 additional ProTips and a detailed Fair Value assessment, along with exclusive access to the Pro Research Report covering this prominent aerospace & defense player.
In other recent news, L3Harris Technologies reported significant developments in its operations. The company's CEO, Christopher E. Kubasik, set a pre-arranged trading plan for exercising stock options and selling shares, which is expected to commence in March 2025. L3Harris also announced the upcoming retirement of board member General Peter W. Chiarelli, a move in line with the company's retirement policy.
L3Harris secured a substantial contract with the U.S. Navy, potentially worth $999 million, to provide advanced communication technology. The company also successfully completed the Safety of Flight qualifications for its Viper Shield electronic warfare suite, designed for F-16 fighter jets.
In financial highlights, L3Harris' Aerojet Rocketdyne segment reported a revenue increase to $598 million in the third quarter due to a significant increase in rocket motor output. Analyst firms BofA Securities, Jefferies, and Truist Securities have upgraded L3Harris' stock and increased price targets, reflecting confidence in the company's growth strategy.
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