L3harris Technologies ((LHX)) has held its Q4 earnings call. Read on for the main highlights of the call.
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L3Harris Technologies recently conducted its earnings call, highlighting a robust performance with record revenue figures and significant program wins. The company’s cost-saving initiatives have been effective, although challenges persist in certain segments, notably in space, and there is uncertainty surrounding international aid programs.
Record Revenue and Backlog
L3Harris achieved a record revenue of $21.3 billion for 2024, marking a notable 10% year-over-year growth. This impressive revenue figure is complemented by a record backlog, which positions the company favorably for future growth and stability.
Significant Program Wins
The company celebrated several key achievements, including winning the Next-Gen Jammer competition and securing a $1 billion IDIQ award for resilient communications for the U.S. Navy. These wins underscore L3Harris’s competitive edge and capability in advancing defense technologies.
LHX NeXt Cost Savings
The LHX NeXt initiative has surpassed expectations, achieving $800 million in cost savings in 2024 with a projection of reaching $1.2 billion by the end of 2025. These savings are pivotal in driving margin expansion and enhancing the company’s financial efficiency.
Strong Free Cash Flow
L3Harris reported a robust free cash flow of $2.3 billion in 2024, reflecting a 14% increase. This growth is attributed to earnings improvements and effective management of working capital, bolstering the company’s financial foundation.
Space Segment Challenges
Despite overall success, the Space and Airborne Systems (SAS) segment experienced a 4% revenue decline year-over-year. The divestiture of the antenna business and challenges in fixed-price development programs contributed to this downturn, highlighting areas needing strategic focus.
Ukraine Aid Uncertainty
The company expressed concerns over the uncertainty of continued U.S. government assistance to Ukraine, which could impact backlog by tens of millions of dollars. This uncertainty poses a potential risk to future financial outcomes.
Fixed Price Development Program Risks
L3Harris faces challenges with legacy fixed-price development programs, particularly in the space sector, resulting in negative adjustments amounting to approximately $100 million in 2024. These risks necessitate careful management and mitigation strategies.
Forward-Looking Guidance
Looking ahead to 2025, L3Harris projects revenue to range between $21.8 billion and $22.2 billion, indicating an organic growth of 4% at the midpoint. The company expects segment operating margins to be in the mid to high 15% range, supported by the LHX NeXt initiative. Free cash flow is anticipated to be between $2.4 billion and $2.5 billion, with non-GAAP EPS projected at $10.55 to $10.85, reflecting a 10% growth. Segment-level forecasts include SAS revenue of $6.9 billion to $7.1 billion, IMS revenue of $7 billion to $7.2 billion, CS revenue of $5.6 billion to $5.7 billion, and Aerojet Rocketdyne at approximately $2.5 billion. The company also plans to repurchase at least $1 billion of shares and transfer $1.2 billion in pension assets and liabilities to a third party by the first quarter of 2025.
In summary, L3Harris Technologies has showcased a strong financial performance with record revenues and strategic wins, despite facing challenges in certain segments. The company’s forward-looking guidance indicates continued growth and strategic initiatives aimed at maintaining its competitive edge and financial health.
