L3Harris Technologies and Raytheon Technologies ‘well diversified competitors’ – Citi

By Sam Boughedda

L3Harris Technologies (NYSE:) and Raytheon Technologies (NYSE:) were reinstated at Neutral by Citi analysts in a research note on aerospace and defense-related stocks on Thursday.

The analysts assigned L3Harris a $250 per share price target, saying the firm views the company as a “well-diversified competitor” with strengths in defense electronics and communication across all domains, including air, sea, land, and space.

However, while they are constructive on the outlook for the company and its defense end markets over the long term, Citi is concerned nearer-term about growth and margin rates relative to investor expectations.

“We would become more positive on shares should the company sign a delayed international award, work through its supply chain constraints more quickly than expected, and / or manage its cost structure in way that allows for current margin rates to either hold or expand. We would become less constructive on shares should the company experience prolong supply chain issues and / or if it is not successful in aligning its cost structure with the prices it can charge for its products,” explained the analysts.

For Raytheon, the analysts assigned a $104 price target on the stock, providing similar reasons on their view of the company. These include it being a “well-diversified competitor” across both commercial and defense markets with “strengths in technology development and engineering that are used to design a broad portfolio of defense and commercial electronics and platforms across all domains, including air, sea, land and space.”

“We are constructive on the outlook for the company and both its commercial and defense end markets over the long-term and our estimates reflect the company’s ability to garner its historic share of future customer work,” added the analysts.

“That said, our estimates also include ramping production of new commercial aircraft to levels articulated by major customers, as well as an acceleration of retirements of older models. In our view, this combination could dampen the company’s ability to expand margins to the level expected by investors and to the levels set out in the company’s longer-term targets. As such, we view the risk/reward in shares balanced at current valuation levels, which are at a slight premium to historic levels vs. the .”

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