L3Harris Technologies, Inc.LHXNYSE

Overview Intelligence Charts News Fundamentals DCF Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Hold

Fair Value: $379.17 per share(market-calibrated)

+9.4%

Upside to Fair Value

Current

$346.59

Pure Model

$381.42

Fair Value

$379.17

Bull Case

$480.82

Bear Case

$302.51

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

1.79%

Calibrated Growth

2.18%

Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $381.42.

What's Driving This Ratingfor LHX

✓

CapEx already efficient

CapEx at 1.72% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 10.94% — below the sector mature average of 13.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $4.3B (12.33% margin).

→

Moderate revenue growth

Analyst consensus projects 0.56% revenue growth, fading to 2.25% by Year 10. Revenue reaches $35.3B (vs $21.9B today).

✓

Model and market roughly agree

Market-implied terminal growth of 1.79% is close to the model's 2.25% (only 46bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 77.60% indicates efficient cash generation. FCF reaches $4.8B by Year 10 (13.53% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.64

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.38%

Cost of Debt

Pre-tax Cost of Debt4.52%

Tax Rate16.87%

After-tax Cost of Debt3.76%

Equity Weight (E/V)86.15%

Debt Weight (D/V)13.85%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (86.15% × 7.38%) + (13.85% × 3.76%)

= 6.88%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$22.0B	$25.1B	$28.7B	$32.1B	$35.3B
EBIT	$2.4B	$2.7B	$3.1B	$3.7B	$4.3B
Tax	$406M	$464M	$529M	$632M	$734M
NOPAT	$2.0B	$2.3B	$2.6B	$3.1B	$3.6B
+ Depreciation	$1.1B	$1.3B	$1.5B	$1.6B	$1.8B
- Capex	$377M	$431M	$491M	$550M	$605M
- Δ NWC	$6M	$85M	$97M	$80M	$39M
Free Cash Flow	$2.7B	$3.1B	$3.5B	$4.1B	$4.8B
Discount Factor	0.936	0.819	0.717	0.628	0.514
Present Value	$2.6B	$2.5B	$2.5B	$2.6B	$2.5B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$4.8B

Terminal Growth Rate2.25%

WACC6.88%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$105.5B

PV of Terminal Value$54.2B

Exit Multiple Method

Year 10 EBITDA$6.2B

Exit Multiple (EV/EBITDA)18.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$110.7B

PV of Terminal Value$56.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$25.3B

PV of Terminal Value$54.2B

Enterprise Value$79.5B

(-) Net Debt$9.4B

Equity Value$70.1B

Shares Outstanding$187M

Price per Share$374.20

Exit Multiple Method

PV of Projected FCFs$25.3B

PV of Terminal Value$56.9B

Enterprise Value$82.2B

(-) Net Debt$9.4B

Equity Value$72.8B

Shares Outstanding$187M

Price per Share$388.63

Pure Model Fair Value

$381.42

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
4.88%	$526.38	$599.50	$700.44	$848.82	$873.24
5.88%	$399.62	$439.50	$490.37	$557.50	$650.18
6.88%	$320.45	$344.70	$374.20	$410.84	$457.59
7.88%	$267.10	$282.94	$301.61	$323.92	$351.04
8.88%	$229.23	$240.13	$252.67	$267.25	$284.43

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$302.51

-12.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.80

Base Case

$381.42

10.0% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 0.64

Bull Case

$480.82

38.7% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 0.54

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Industrials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth0.56%

Year 3 Revenue Growth7.21%

Year 5 Revenue Growth7.29%

Year 7 Revenue Growth5.27%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin10.94%

Terminal EBIT Margin13.00%

Tax Rate16.87%

Historical Capex / Rev1.72%

NWC / Revenue5.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 18x EV/EBITDA (S&P 500: 22x P/E)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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