L3Harris Technologies (NYSE:LHX) was raised to Outperform from Neutral, with the price target increased to $219 from $198 per share at Baird on Tuesday.
Analysts said the downgrade and price target cut reflect the significant underperformance of the LHX stock year-to-date (down 17%).
They also noted that two major M&A deals have closed in 2023 and defense funding is on the path to increase globally, which sets up improving fundamentals for LHX in 2024.
LHX has a "favorable long-term growth outlook," said the analysts. "MSD growth is a good baseline assumption for 2024+, with exposure to missiles/munitions via AJRD providing upside plus 40% of total revenues are short-cycle so as funding improves along with operational tempo overall growth should benefit."
"While margin compression narrative has been a concern, we see improving fundamentals for growth, contract execution (less negative EACs) plus deleveraging that should drive favorable bottom-line and FCF growth." the analysts concluded.