LHX

L3Harris is a high-quality, mission-critical defense prime: revenue grew 9.8% to $21.3B, operating income rose 10% to $2.11B, diluted EPS climbed 8.4% to $8.53, and operating cash flow jumped 21.4% to $3.11B. Against only $424M of capex, that implies roughly $2.7B of free cash flow, which management is returning aggressively — buybacks more than doubled to $1.15B and dividends reached $903M — while paying down debt (long-term debt -5.8% to $10.4B, current debt to zero, cash +73.8% to $1.07B). The balance sheet is sound at 1.10x liabilities/equity. The MD&A underscores demand durability: 75% of revenue comes from the U.S. Government, and the July 2025 reconciliation package added $155B for national defense explicitly aligned with L3Harris priorities — Golden Dome, munitions, and shipbuilding.

The most interesting forward catalyst is structural. Per Note 16, the DoW agreed to anchor a $1.0B convertible preferred investment in the Missile Solutions (MSL) business, with an intended IPO of MSL in 2H 2026 while L3Harris retains control. Paired with the streamlining from four segments to three (SMS, CSD, MSL), this is a credible value-unlock path that could re-rate the missiles/hypersonics franchise separately from the parent.