An independent two-stage DCF analysis by a frontier AI model.
L3Harris has successfully positioned itself as the 'Trusted Disruptor' among the major defense primes. By focusing heavily on technology-dense areas like secure communications, electronic warfare, and space systems, it is aligned with the DoD's shifting priorities away from legacy platforms toward interconnected, multi-domain operations. The recent acquisition of Aerojet Rocketdyne further cements its position as a critical supplier, giving it control over vital propulsion technologies for missiles and space launch.
Financially, the company generates robust free cash flow, exceeding $2.7 billion annually. While currently trading near our estimate of fair value, the durability of its government contracts provides a high floor. The primary drivers for future outperformance will be management's ability to smoothly integrate Aerojet Rocketdyne, expand operating margins, and capitalize on the long-term secular growth in space and cyber defense spending.
A 4% growth rate assumes steady, single-digit top-line expansion driven by sustained defense budgets, coupled with margin improvements as the company realizes synergies from the Aerojet Rocketdyne acquisition and its broader optimization initiatives.
A 7.5% discount rate reflects the highly predictable, contract-backed nature of its revenue, offset slightly by the execution risks of integrating a major acquisition and the inherent cyclicality of government budgeting.
A 2.5% terminal rate aligns with long-term GDP growth and inflation expectations, reflecting the defense industry's structural link to the broader economy and government spending capacity.
Intrinsic value per share under varying discount rate and terminal growth rate assumptions.
| WACC ↓ / Terminal → | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 1.5% | $420.86 | $336.69 | $280.58 | $240.49 | $210.43 |
| 2.0% | $480.99 | $374.10 | $306.08 | $258.99 | $224.46 |
| 2.5% | $561.15 | $420.86 | $336.69 | $280.58 | $240.49 |
| 3.0% | $673.38 | $480.99 | $374.10 | $306.08 | $258.99 |
| 3.5% | $841.73 | $561.15 | $420.86 | $336.69 | $280.58 |
■ Undervalued vs current price ■ Overvalued vs current price
Unlike traditional primes that build massive platforms (ships, planes), LHX focuses on the sensors, software, and communication links that connect those platforms, allowing for faster innovation cycles.
It adds a highly complementary, essential capability (propulsion) to LHX's portfolio. The valuation assumes successful integration and the realization of cost synergies, which will boost future free cash flow.
A significant reduction in the U.S. defense budget or prolonged political gridlock (continuing resolutions) that delays new contract awards and funding for key programs.
Disclaimer: The numbers presented on this page are for educational and entertainment purposes only. They are the result of a deterministic mathematical model fed with assumptions generated by an Artificial Intelligence (Gemini 3.1). This does not constitute investment advice. Always conduct your own due diligence before investing in the stock market.