L3Harris Raises 2026 EPS Outlook as Backlog Hits $53.2 Billion

L3Harris (LHX) increased its 2026 revenue and GAAP earnings outlook after third-quarter organic revenue rose 9% and a surge in orders lifted contractual backlog to $53.2 billion. The defense technology company reported $19.3 billion of orders, representing a 3.2 book-to-bill ratio, with Missile Solutions accounting for most of the quarterly backlog increase.

Revenue for the quarter ended in 2026 rose 7% year over year to $6.06 billion. GAAP operating income increased 27% to $786 million, while operating margin expanded 200 basis points to 13.0%. Net income available to common shareholders was $613 million, and diluted GAAP earnings per share climbed 33% to $3.28.

On a non-GAAP segment basis, operating income advanced 7% to $967 million. Segment operating margin was unchanged at 15.9%, as higher volumes and program execution were partly offset by mix pressure in Missile Solutions.

Free cash flow, a non-GAAP measure, reached $1.26 billion, up from $427 million in the prior-year quarter. Net cash provided by operating activities was $1.44 billion, and capital expenditures totaled $179 million. L3Harris ended the quarter with a trailing-12-month net debt leverage ratio of 1.9 times, down from 2.7 times at the end of fiscal 2025.

Backlog expands on Missile Solutions orders

Total contractual backlog rose 47% from $36.3 billion a year earlier to $53.2 billion. The quarter-end balance included $31.2 billion of funded backlog and $22.0 billion of unfunded backlog. The company expects 35% of the total to convert to revenue over the next 12 months.

Missile Solutions recorded $12.5 billion of orders and an 11.8 book-to-bill ratio, taking segment backlog to $20.0 billion from $10.5 billion at the end of the second quarter. Revenue increased 5% to $1.06 billion and rose 17% organically after excluding the divested Commercial Space Propulsion business.

Growth in the segment included $152 million from higher missile propulsion systems revenue, with solid rocket motor revenue up 29% organically, and $27 million from Advanced Effects. Those gains were partly offset by a $25 million decline in space propulsion systems and a $103 million revenue reduction tied to the divestiture. Segment operating margin narrowed 30 basis points to 12.0% because of business mix.

L3Harris said it is expanding missile production capacity, including a new solid rocket motor production facility in Camden, Arkansas, while construction continues on additional advanced propulsion facilities in the state. Missile Solutions capital expenditures totaled $101 million during the quarter.

Space and communications businesses grow

Space & Mission Systems revenue rose 10% to $3.09 billion. Growth included $127 million from missile-warning, missile-tracking and classified space programs, $107 million from classified intelligence, surveillance and reconnaissance contracts, $36 million from higher Federal Aviation Administration volume in Mission Networks, and $25 million from increased F-35 activity in Airborne Solutions.

The segment’s operating margin increased 20 basis points to 10.9%, supported by higher volumes and program execution. Backlog was $22.3 billion, broadly stable from the second quarter, and book-to-bill was 1.0.

Communications & Spectrum Dominance revenue increased 3% to nearly $2.0 billion. The VAMPIRE counter-unmanned aircraft systems programs added $54 million of revenue, while international software-defined radios contributed another $48 million. These increases were partly offset by a $29 million decline in Spectrum Superiority revenue, reflecting an additional work week in the prior-year quarter.

The segment’s operating margin expanded 50 basis points to 25.2%, which the company attributed to program execution, greater international content and favorable mix. Orders totaled $3.9 billion, producing a 1.9 book-to-bill ratio and raising backlog to $10.9 billion from $9.0 billion in the previous quarter.

2026 outlook updated

L3Harris now expects 2026 revenue of $23.5 billion to $23.7 billion, compared with its previous range of $23.2 billion to $23.7 billion. Its organic revenue growth forecast is 9% to 10%, versus 8% to 10% previously.

The company raised its GAAP EPS forecast to $12.25 to $12.35 from $11.80 to $12.00. Expected free cash flow remains $3.0 billion, based on approximately $3.6 billion of net cash from operating activities and about $600 million of capital expenditures. The consolidated segment operating margin outlook remains in the low-16% range.

At the segment level, Space & Mission Systems revenue is now expected to be approximately $11.9 billion, up from the prior estimate of about $11.7 billion. Communications & Spectrum Dominance revenue is projected at roughly $7.9 billion, compared with about $8.0 billion previously. Missile Solutions revenue guidance remains approximately $4.1 billion.

For 2028, L3Harris continues to target an 8% organic revenue compound annual growth rate from fiscal 2025. It now expects segment operating margin of about 16%, compared with 16.3% previously, and free cash flow of more than $3 billion, versus the prior $3.5 billion framework. The framework does not reflect the potential initial public offering of AXVY.

The presentation identified mix pressure in Missile Solutions and the effects of divestitures as current constraints. It also showed that 72% of third-quarter segment revenue came from fixed-price or time-and-materials contracts, while a substantial portion of backlog was unfunded. L3Harris cautioned that its guidance and longer-term framework remain subject to the risks and uncertainties described in its regulatory filings.