L3harris Technologies (LHX) Q4 2023 earnings summary

Executive summary

• FY23 revenue rose 14% to $19.4B, including 6% organic growth; Q4 revenue rose 17% to $5.3B, with acquisitions contributing significantly.

• FY23 orders were $22.8B, book-to-bill was 1.18x and year-end backlog set a record at $33B.

• FY24 guidance targets revenue of $20.7B–$21.3B, non-GAAP EPS of $12.40–$12.80 and free cash flow of $2.2B.

Financial highlights

• FY23 segment operating income was $2.9B and segment operating margin was 14.8%, down 60 bps; Q4 segment margin was 15.1%, up 50 bps YoY.

• FY23 non-GAAP EPS was $12.36; Q4 GAAP EPS was $0.83 and adjusted non-GAAP EPS was $3.35; FY23 GAAP EPS was $6.44.

• FY23 cash from operations was $2.096B and free cash flow was $2.009B, down 1% YoY.

• Dividends were $868M and share repurchases were $518M in FY23.

• Q4 GAAP operating income was $154M, with a 2.9% margin; FY23 GAAP operating income was $1.426B, with a 7.3% margin, including goodwill impairment related to the pending CAS sale.

Outlook and guidance

• FY24 guidance: revenue $20.7B–$21.3B, segment operating margin ~15%, non-GAAP EPS $12.40–$12.80 and free cash flow $2.2B, up ~10%.

• FY24 segment revenue guidance: SAS $6.9B–$7.1B; IMS $6.4B–$6.6B; CS $5.3B–$5.4B; Aerojet Rocketdyne $2.4B–$2.5B.

• FY24 segment margin guidance: SAS mid-to-high 11%; IMS low-to-mid 11%; CS low-to-mid 24%; Aerojet Rocketdyne high 11%.

• Supplemental assumptions: 13.0%–13.5% non-GAAP tax rate, ~2% of sales for capital expenditures and ~650M average diluted shares.

• Net interest expense is expected to rise $100M YoY due to acquisition debt; pension income is expected to fall $120M, primarily from lower CAS pension recovery.