L3Harris Technologies presents a diversified aerospace and defense systems integration profile characterized by robust cash generation and conservative leverage, supported by solid operating margins and predictable cash flow metrics.
The company is generating meaningful operating cash: trailing twelve‑month operating cash flow was $3.11B versus trailing twelve‑month net income of $1.61B, a $1.50B excess that reflects strong cash conversion and operating cash flow durability; the dataset also shows an operating‑to‑net income ratio of 1.934x. Leverage appears conservative with a debt‑to‑equity of 0.4670 and very comfortable interest coverage of 28.99x, and reported operating margin measures around 18.15%, indicating persistent operational efficiency. Earnings quality metrics reinforce the cash strength: average cash conversion above 1 (1.9340) and an earnings stability indicator (avg/stdev) of 3.72 point to predictable, cash‑backed results [Earnings Quality Analysis], [Profit Margin Trends], [Revenue & Net Income].
Notable areas of concern include uneven reported revenue and profit outcomes across the period set: reported revenue entries vary widely (for example $19.42B at 2023‑12‑29 versus $967.0M at 2026‑01‑02), and net income has swung from a loss of -$300.0M (2022‑09‑30) to peaks near $1.91B (2022‑07‑01) and more recently between $758.0M (2026‑01‑02) and $512.0M (2026‑04‑03), which complicates trend interpretation. Margin reporting also shows anomalous recent readings — a reported net profit margin of 166.1% and a gross margin of −1063.6% on 2026‑01‑02 — suggesting one‑off items or classification shifts that require reconciliation before relying on headline margin percentages [Profit Margin Trends].
Return on equity is modest in the current run, with the latest quarter at 8.2%, reflecting mid‑single‑digit capital returns compared with historical highs [Return on Equity (ROE)].
Key fundamentals to watch going forward are consistency in top‑line reporting and quarterly revenue cadence (including the next comparable revenue prints), the relationship of operating cash flow to net income and any recurring drivers of the current $1.50B cash/net income gap [Earnings Quality Analysis], clarity on margin reconciliation for the recent anomalous readings [Profit Margin Trends], movement in ROE from the current 8.2% level [Return on Equity (ROE)], and cash allocation trends such as investing cash flow recently at $407.0M and financing cash flow at −$2.56B on a TTM basis [Strategic Capital Allocation]. Additional monitoring of EPS and revenue per share dynamics and valuation trajectory may be informative [EPS Diluted & Revenue per Share], [Revenue & EPS Growth], [Price-to-Earnings (PE) Ratio Trend].
The foundation of business quality and long-term value creation
L3HARRIS TECHNOLOGIES, INC. /DE/'s net income has generally been positive in recent quarters but shows variability. After a negative result of -$300.0M for the period ending 2022-09-30, net income recovered and moved through several higher quarters: \$736.0M (2025-01-03), \$386.0M (2025-03-28), \$462.0M (2025-10-03), peaking at \$758.0M (2026-01-02) before declining to \$512.0M in the most recent quarter (2026-04-03). The loss in 2022-09-30 and the peak in 2026-01-02 are the most notable inflection points in the net income series.
Revenue entries in the dataset are reported at uneven intervals and show large differences across periods. Reported revenue values include \$19.42B (2023-12-29), \$5.29B (2024-09-27), and a more recent reported amount of \$967.0M (2026-01-02). The most recent reported net income was \$512.0M (2026-04-03). The most recent reported revenue was \$967.0M (2026-01-02).
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Over the period Jan 2025 to Jan 2026, L3harris Technologies Inc De converts approximately -1064¢ of every revenue dollar into gross profit (gross margin: -1063.6%).After accounting for operating expenses and taxes and expenses, the company retains 166.1% as net profit margin, resulting in $1.61B in net earnings.
Period Information
Report Type: Annual (10-K)
Period: Jan 2025 to Jan 2026
Analyzing long-term margin stability and competitive positioning
L3HARRIS TECHNOLOGIES, INC. /DE/ shows a marked divergence between the most recent quarter and earlier reported periods. Gross margin and net profit margin moved sharply between the 2023-12-29 and 2026-01-02 reporting dates: gross margin was 26.3% on 2023-12-29 but is reported as -1063.6% on 2026-01-02, while net profit margin was 6.3% on 2023-12-29 and is reported as 166.1% on 2026-01-02. These recent figures represent a substantial inflection from the multi-year pattern of positive gross margins in the mid-20s to mid-30s and net margins in the single- to low-double digits seen in earlier periods.
Most recent gross margin: -1063.6% (period end 2026-01-02)
Most recent net profit margin: 166.1% (period end 2026-01-02)
Latest operating margin: 18.1% (period end 2018-06-29)
Understanding Profit Margins
Between Jan 2025 and Jan 2026, L3harris Technologies Inc De converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
L3HARRIS TECHNOLOGIES, INC. /DE/ shows a clear gap in the most recent trailing twelve months: operating cash flow (TTM) at the 2026-01-02 period is $3.11B versus net income (TTM) of $1.61B at the same date, a difference of $1.50B. Net income has been volatile over the last several periods — it reached about $1.91B on 2022-07-01, declined to $924.0M by 2023-03-31, recovered to $1.89B on 2025-03-28, and then moved down to $1.61B on 2026-01-02 — marking notable inflection points in mid-2022, early-2023, early-2025, and early-2026.
Operating cash flow in the latest TTM substantially exceeds the most recent net income TTM and is materially higher than an earlier reported operating CF of $849.2M dated 2014-06-27 in the dataset. The most recent trailing twelve-month operating cash flow was $3.11B and the most recent trailing twelve-month net income was $1.61B.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
Trailing Twelve Months
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
L3HARRIS TECHNOLOGIES, INC. /DE/’s ROE has been in the mid-to-high single digits in the most recent quarters. The last three reported figures show 7.7% (period end 2025-01-03), 9.9% (period end 2025-03-28), and then 8.2% in the latest quarter (period end 2026-01-02), indicating modest quarter-to-quarter volatility around the high single-digit range. Notable prior quarterly lows occurred in 2022–2023 (6.2% on 2022-09-30 and 5.0% on 2023-03-31), while a small rebound toward ~10% was recorded in mid‑2025 before the most recent decline to 8.2%.
Over the longer history provided, ROE shows several pronounced inflection points: very high readings in 2010–2014 (peaking at 31.6% on 2010-10-01 and 29.3% on 2014-06-27), a sharp trough at 1.6% on 2012-06-29, and subsequent movement into a single-digit regime through the 2020s. The most recent quarterly Return on Equity (ROE) was 8.2%.
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
L3HARRIS TECHNOLOGIES, INC. /DE/ demonstrates a strong operating cash flow trend in the most recent trailing twelve months, with $3.11B (period ending 2026-01-02), indicating material cash generation from core operations versus earlier multi-year levels, such as $849.2M in mid‑2014.
Investing cash flow in the latest TTM is a positive $407.0M (period ending 2026-01-02), which contrasts with historically negative investing outflows shown in prior years, such as –$159.0M in mid‑2019 and –$162.6M in mid‑2014, representing a notable change in the investing line of the cash flow profile.
Financing cash flow has been a material net outflow over recent years, including large negative TTM values around 2021, such as –$3.40B, but the most recent reported financing TTM moved from –$3.08B (period ending 2026-01-02) to –$2.56B (period ending 2026-04-03), showing a reduction in net financing outflows in the latest quarter.
The most recent operating cash flow (TTM) was $3.11B, the most recent investing cash flow (TTM) was 407.0M, and the most recent financing cash flow (TTM) was –$2.56B.
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Trailing Twelve Months
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.