L3Harris Technologies (NYSE: LHX) has many factors in its favor to provide ample tailwind for share prices, including Donald Trump. His defense policies were a boon to the defense industry during the first administration and will likely do so again. The opportunity for investors is that the stock outperformed in a bullish market and will likely do so again. The stock rose by 100% from November 2016 through November 2020 and is on track to set new highs in 2024 and 2025.
L3Harris and Palantir Will Revolutionize Defense Technology
L3Harris Technologies and Palantir Technologies (NYSE: PLTR) announced a strategic partnership to revolutionize the defense industry. The deal includes applying Palantir’s AI technology across the LHX network to improve current capabilities while advancing technology to the next level. Analysts at Bank of America hailed the integration of Palantir’s AI with L3Harris’ sensor and software technologies as a forward-thinking move, highlighting the widening gap between legacy and modern defense technology providers. The goal is to improve the U.S. detection and reaction capability, but there is also a benefit to LHX investors. Palantir technology can also aid L3Harris operational quality, driving margin improvement and innovation.
The trends in 2024 are positive. The company grew revenue and earnings in FQ3, with revenue growth in the high single-digit range, topping the consensus estimate although slowing sequentially and compared to last year. Margin new is also positive, with margins compressed but marginally and less than expected. Adjusted earnings grew at a slower 5% pace in Q3, still outpacing the consensus reported by MarketBeat, with margin improvements expected over the coming quarters. Guidance is solid and backed up by a strong 1.4x book-to-bill ratio. The company narrowed its target ranges to the high end of the previously stated ranges, leading analysts to raise their yearly estimates and provide a tailwind for the market.
The analysts' sentiment trends are also positive. The sentiment has been steady at Moderate Buy for more than a year while the price target trended higher. The consensus price target assumes a 5% upside from the critical resistance target. Still, the revision trends are bullish, lifting it by nearly 10% following the last earnings release and leading to the high-end range. The latest targets include a revision from Bank of America to $300, about 12.5% of upside from the critical resistance point, not counting the dividend.
L3Harris Technologies Will Be a Dividend Aristocrat
L3Harris Technologies has an attractive dividend that is made safer by the growth outlook. The stock pays $4.64 per share, only 35% of the earnings, and the balance sheet is sound.
The company has already increased its distribution for 23 years, so it must only do so for another two before qualifying as a Dividend Aristocrat.
That is a selling point because inclusion in the index means increased ownership, including retail investors and fund holdings for ETFs and mutual funds that track the Dividend Aristocrat Index. Regardless, the $4.64 is a reliable annual yield of 1.8%, with shares near $250.
The price action in LHX stock is favorable. The monthly price action chart, in particular, shows a solid uptrend gaining strength. Strength is seen in the volume and MACD, which are rising regarding volume and converging with the new highs regarding the MACD.
The convergence suggests the market will continue to trend higher and will likely set new highs in 2025. The new highs will be aided by institutional activity, which is bullish in 2024. The institutions provide a strong tailwind for the market because they own 85% of the shares and have bought on balance for three quarters in 2024, including in Q3 and Q4.
