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L3Harris Technologies Inc (LHX) Q1 2024 Earnings Call Transcript Highlights: Strong Growth and ...

GuruFocus Research
·3 min read

  • Revenue: Grew 17% year-over-year, with a total of $5.5 billion for the quarter.

  • Operating Income: Increased by $150 million, with margins expanding by 80 basis points to 15.1%.

  • Net Income: Details not explicitly mentioned, but operating income and margin improvements were highlighted.

  • Earnings Per Share (EPS): Grew 7% to $3.06 per share; on a pension-adjusted basis, first quarter EPS was up over 10%.

  • Free Cash Flow: Reported as an outflow of $156 million for the quarter.

  • Backlog: Remains strong at over $32 billion, supporting future margin expansion.

  • Book-to-Bill Ratio: Started the year at 1.06x.

  • Dividends: Increased for the 23rd consecutive year.

  • Share Repurchases: Executed about half of the 2024 share repurchase target in Q1.

  • Guidance: 2024 revenue guidance tightened to $20.8 billion to $21.3 billion, with free cash flow commitment reaffirmed at $2.2 billion and EPS guidance increased to $12.70 to $13.05 per share.

Release Date: April 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Chris, how does the win on NGI with your partner impact your outlook for Aerojet? And considering the fiscal '24 supplementals, do you get more bullish about your ability to hit the $23 billion target? A: Christopher E. Kubasik - L3Harris Technologies, Inc. - Chairman & CEO: Yes, the NGI win is significant and was not factored into our original Aerojet Rocketdyne deal model, making it accretive to our goals. The quantities are still to be determined as it starts as a development program. We anticipate revenue impact around the '25-'26 timeframe, contributing to our growth targets.

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Q: Since forming a new Business Review Committee, can you provide any updates on progress and key focus areas? How does this relate to your LHX NeXt initiatives? A: Christopher E. Kubasik - L3Harris Technologies, Inc. - Chairman & CEO: The Business Review Committee has been reviewing various aspects including operations, programs, and LHX NeXt strategy. It's been a collaborative process, helping to orient new board members and align with company goals. We expect a mid-year report with findings and recommendations.

Q: Can you discuss the nearly 100 basis points of year-over-year margin expansion and its drivers? A: Kenneth L. Bedingfield - L3Harris Technologies, Inc. - Senior VP & CFO: The margin expansion is attributed to a mix of operational improvements, disciplined bidding, performance on programs, and contributions from LHX NeXt. Each major bucket, including program maturity and cost-plus mix growth, especially in space, contributed to this improvement.

Q: Can you provide more details on the international pipeline at IMS and potential order movements? A: Christopher E. Kubasik - L3Harris Technologies, Inc. - Chairman & CEO: IMS has secured a NATO Electronic Attack Aircraft order and is exploring opportunities in the Middle East and Far East for biz jet ISR capabilities. There's also potential in maritime collaborations with Australia and growth in the undersea ranges market.

Q: How do you view the revenue synergies and market share gains, especially with the recent win in Taiwan? A: Christopher E. Kubasik - L3Harris Technologies, Inc. - Chairman & CEO: We're selective in investments and bids, focusing on areas like space, airborne ISR, maritime, and cyber domains. The Taiwan win is significant, supporting our strategy to replace incumbents and expand market share, aligning with our mid-single-digit growth targets.

Q: What is the potential to ramp up production at Aerojet Rocketdyne given the increasing demand, and how are you addressing production bottlenecks? A: Christopher E. Kubasik - L3Harris Technologies, Inc. - Chairman & CEO: Demand for Aerojet Rocketdyne's capabilities is growing, and we're investing in capacity expansion and supply chain improvements. We anticipate double-digit top-line growth over the next 5-7 years, with significant investments in facilities and technology to enhance production capabilities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.