L3Harris Technologies, Inc. (NYSE:LHX) Q4 2022 Earnings Call Transcript

L3Harris Technologies, Inc. (NYSE:LHX) Q4 2022 Earnings Call Transcript January 27, 2023

Operator: Greetings. Welcome to the L3Harris Technologies Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Rajeev Lalwani, Vice President, Investor Relations. Thank you and you may now begin.

Rajeev Lalwani: Thank you, Rob. Good morning and welcome to our fourth quarter 2022 earnings call. We published our investor letter after the market close yesterday. So today’s call will primarily be focused on answering your questions. Joining me for the call are Chris Kubasik, our CEO; and Michelle Turner, our CFO. A few words on forward-looking statements and non-GAAP measures. Forward-looking statements involve risks, assumptions and uncertainties that could cause actual results to differ materially. For more information, please see our investor letter and SEC filings. A reconciliation of non-GAAP financial measures to comparable GAAP measures is included in the Investor Relations section of our website, which is l3harris.com, where a replay of this call will also be available. Before going to questions, Chris will make some brief comments.

Chris Kubasik: Okay. Thank you, Rajeev, and good morning, everyone. As we reported yesterday, our fourth quarter came in ahead of expectations, and our 2023 guidance points to steady or improving trends. We’ve also been active on the M&A front, consistent with our strategy, as opportunities present themselves. Let’s start with Q4. The team delivered a solid top line, up 6% organically, with Communications leading the way as we saw improvements in electronic component availability within tactical comms. This contributed to the second consecutive quarter of organic growth for our company. Segment margins were about what we expected, with ongoing pressures from macro factors, including inflated costs for material and labor. The net of this is EPS just above our recently guided midpoint and free cash flow at our $2 billion outlook.

Smartphone, Payment, Wireless Photo by Jonas Leupe on Unsplash

Turning to 2023. We’re consistent with what we said on the last call: Expanding our revenue in the 2% to 4% range, including the Link 16 acquisition, while holding our industry-leading margins steady at about 15.5%. EPS adjusted for pension headwinds points to a stable operating results, and we’re expecting an improving cash flow profile. Lastly, on recent M&A activity, we’ve previously discussed an opportunistic approach within our balanced capital allocation framework. We had opportunities to acquire two unique assets in ViaSat’s Tactical Data Link business and Aerojet Rocketdyne. We closed TDL in 13 weeks and are off to a strong start with integration. In fact, our newest employees are already on the L3Harris payroll system and participating in our 401(k) and benefit programs.

This acquisition positions us well to play a central role in networking and resiliency for global defense customers and fills in a needed capability as we develop our JADC2 solutions. Regarding Aerojet Rocketdyne, it’s a national asset critical to future warfare that has a leadership position in propulsion, adding exposure to new growth markets for us with munitions, space exploration and hypersonics. It brings nearly $7 billion of backlog and tailwinds driven by global demand. With both of these acquisitions, we’ll utilize our recent experience from our merger of equals. We expect much of the integration work for TDL to be complete once we bring Aerojet Rocketdyne into L3Harris. We’ll hold an Investor Day later in the year to talk more about the strategy and outlook for our growing company.

So we’re building momentum with our strategy and look forward to executing on our performance first initiative in 2023. With that, let’s open the line for questions.

See also 12 Best Low Priced Dividend Stocks To Buy and 11 Most Undervalued Foreign Stocks To Buy.

To continue reading the Q&A session, please click here.

Related posts

Advisors in Focus- January 6, 2021

Gavin Maguire

Advisors in Focus- February 15, 2021

Gavin Maguire

Advisors in Focus- February 22, 2021

Gavin Maguire

Advisors in Focus- February 28, 2021

Gavin Maguire

Advisors in Focus- March 18, 2021

Gavin Maguire

Advisors in Focus- March 21, 2021

Gavin Maguire