RTX vs. L3Harris: Which Aerospace-Defense Stock Offers More Firepower?

Globe and Mail

23-05-2025

Advanced aerospace and defense technologies are becoming an increasingly attractive investment choice, supported by a booming commercial aviation sector and steadily rising global defense budgets amid an intensifying threat landscape. Against this backdrop, companies like RTX Corporation RTX and L3Harris Technologies LHX remain well-positioned to benefit from growing demand for missile defense, cybersecurity, electronic warfare and space systems.
Both stocks bring a diversified portfolio to the table. While RTX is a well-known provider of advanced aircraft engines and auxiliary power systems, along with missiles, radars, sensors, hypersonic and space-based systems, LHX's strength lies in tactical communication systems, advanced Intelligence, Surveillance, and Reconnaissance ('ISR') systems, space payloads and propulsion, avionic sensors as well as missile defense systems.
Considering both RTX and LHX's well-established position in the aerospace-defense industry, investors seeking exposure to resilient aerospace-defense leaders might ask themselves: Which one is a better bet? Let's delve deeper to get an answer.
Financials and Growth Catalysts: How Do RTX and LHX Stack Up?
As of March 31, 2025, RTX reported $5.16 billion in cash and cash equivalents, with a long-term debt of $38.24 billion and current debt of $3.06 billion. While its long-term debt remains high, the company's strong short-term liquidity supports ongoing investments in advanced defense technologies and commercial engine upgrades, reinforcing its position in the aerospace-defense sector.
In contrast, L3Harris exhibits a weaker solvency profile. As of March 28, 2025, the company held only $0.22 billion in cash against a long-term debt of $10.98 billion and a current debt of $1.28 billion — both figures well above its cash reserves. This limited financial flexibility could hinder L3Harris's ability to fund innovation and growth in the capital-intensive defense market.
As far as growth catalysts are concerned, the expanding U.S. defense budget serves as a major growth driver for both companies. In May 2025, the White House proposed a 13% increase in defense spending to $1.01 trillion for fiscal 2026, with a special focus on enhancing U.S. space dominance. This initiative is expected to benefit both RTX and LHX, which have strong positions in space systems. RTX specializes in missile warning technologies, while LHX offers radar systems for space battle management and command and control.
Another key growth catalyst is the $175 billion allocated for the Golden Dome — a next-generation missile defense system aimed at countering advanced missile threats. Both companies are well-positioned to secure contracts under this initiative. L3Harris's Hypersonic and Ballistic Tracking Space Sensor ('HBTSS'), launched in February 2024, is currently the only proven on-orbit system for tracking hypersonic missiles. Meanwhile, RTX recently delivered its first AN/TPY-2 radar with Gallium Nitride (GaN) technology, designed to support hypersonic missile defense. These advancements highlight both firms' technical edge and strategic relevance in future defense programs.
Beyond defense, RTX benefits from a recovering global commercial aviation sector. In the first quarter of 2025, the company posted 8% year-over-year organic sales growth, driven by strong double-digit gains in commercial aftermarket sales and modest growth in OEM sales. This commercial exposure adds a layer of revenue diversification and resilience.
By contrast, LHX recently divested its Commercial Aviation Solutions ('CAS') segment, which used to provide avionics, pilot training, and analytics services for the commercial aviation industry. This strategic move signals LHX's renewed focus on its core defense and national security segments, potentially streamlining its operations.
Challenges for RTX & LHX
Supply-chain disruptions continue to challenge the aerospace and defense industry, driven by component shortages and macroeconomic factors like inflation and labor shortages. Both RTX and L3Harris rely on complex global supply chains, making them vulnerable to these persistent issues. However, commercial aerospace faces greater exposure compared to defense, which benefits from stable, long-term government funding and priority access to critical materials due to national security. As a result, RTX, with its significant commercial aerospace presence, may be more adversely impacted by ongoing supply-chain challenges than L3Harris, whose defense-focused portfolio provides more resilience.
Labor shortages remain a significant challenge for aerospace-defense companies like RTX and L3Harris. According to the 2024 "On the Horizon" Workforce Study by the Aerospace Industries Association ('AIA') and PwC, the industry faces high turnover rates worsened by widespread retirements. Attrition among AIA members has averaged 13% over the past two years, well above the U.S. national average of 3.8%. This elevated attrition risks production delays and quality issues as experienced talent leaves, affecting the operational efficiency of both RTX and L3Harris.
How Do Zacks Estimates Compare for RTX & LHX?
The Zacks Consensus Estimate for RTX's 2025 sales and earnings per share (EPS) implies an improvement of 4.2% and 5.4%, respectively, from the year-ago quarter's reported figures. RTX's EPS estimates have shown downward movement over the past 60 days.
The Zacks Consensus Estimate for L3Harris' 2025 sales implies a year-over-year improvement of 0.9%, while that for earnings suggests a 20.1% decline. The stock's EPS estimates have shown a downward movement over the past 60 days.
Stock Price Performance: RTX Vs LHX
RTX (up 6.9%) has underperformed LHX (up 19.7%) over the past three months. However, in the past year, RTX has outperformed LHX. While RTX's shares surged 26.2%, LHX gained 7.2%.
Image Source: Zacks Investment Research
RTX's Valuation More Attractive Than LHX
RTX is trading at a forward earnings multiple of 21.22X, below LHX's forward earnings multiple of 21.53X. However, when compared to their respective five-year median, both RTX and LHX's forward earnings multiples look a bit stretched.
LHX Less Leveraged Than RTX
With the development of advanced defense technologies requiring significant research and development (R&D) investments, defense primes like RTX and LHX often fund such investments through debt. A comparative analysis of their long-term debt-to-capital ratios reflects that RTX is more debt-ridden than LHX.
To Keep RTX or LHX?
In conclusion, while both RTX and L3Harris Technologies are strong contenders in the aerospace-defense space, RTX may be the more compelling stock that one should retain in their portfolio.
Despite its higher debt load, RTX maintains a solid short-term solvency position and benefits from exposure to both the commercial aviation and defense markets, providing it with diversified growth avenues. Its recent strong performance in commercial aftermarket sales enhances its long-term growth prospects. LHX, while more defense-focused and less leveraged, faces constraints from its weaker cash position, which may hinder R&D investments. Moreover, the projected decline in LHX's earnings for 2025 and the divestiture of its commercial aviation unit might limit its growth scope in the near term.
Given RTX's broader market reach, better earnings outlook, and slightly more attractive valuation, it edges ahead as the more balanced stock to remain in one's portfolio.
Both RTX and LHX carry a Zacks Rank #3 (Hold) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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L3Harris Technologies Inc (LHX): Free Stock Analysis Report
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