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Business Insider
26-07-2025
- Business
- Business Insider
Sector Spotlight: Demand, backlog expansion drive Q2 results in defense sector
Welcome to the latest edition of 'Sector Spotlight,' where The Fly looks at a new industry every week and highlights its happenings. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. DEFENSE SECTOR NEWS: Booz Allen (BAH) was awarded a $315M contract with a maximum performance period of up to five years to deliver the Advanced Battle Management System Distributed Battle Management Node Phase II Tactical Operations Center-Light prototype for the Department of the Air Force Program Executive Office for Command, Control, Communications, and Battle Management. Booz Allen is partnering with L3Harris Technologies (LHX) for this rapid prototyping effort aimed at enabling Combined Joint All-Domain Command and Control. Lockheed Martin was awarded a $999M indefinite-delivery/indefinite-quantity contract for Joint Air to Surface Standoff Missile and Long-Range Anti-Ship Missile production support. This contract provides for lifecycle support for all efforts related to JASSM, LRASM and all their variants in the areas of system upgrades, integration, production, sustainment, management and logistical support. Work will be performed at Orlando, Florida, and is expected to be complete by July 17, 2030. This contract was a sole source acquisition. No funds are being obligated at the time of award. The Air Force Life Cycle Management Center is the contracting activity. EARNINGS RECAP: L3Harris Technologies delivered a beat and raise quarter in Q2, posting a record book to bill ratio. 'We delivered impressive second-quarter results, led by a record book-to-bill of 1.5x, solid organic growth, and year-over-year adjusted segment operating margin expansion for the seventh consecutive quarter. This marks a clear inflection point, with our strongest top-line growth in six quarters and meaningful progress towards our 2026 Financial Framework. Our Trusted Disruptor strategy continues to drive differentiated, mission-critical solutions that meet our customers' evolving needs while creating value for shareholders,' said Christopher Kubasik, Chair and CEO. Kubasik added, 'Defense is entering a generational investment cycle, as U.S. and allied budgets grow rapidly. Demand is accelerating, and our portfolio is aligned with key growth areas – Golden Dome, space, missiles, shipbuilding, autonomy, and resilient communications. With the flexibility of our business-model agnostic approach – able to win as a prime, sub, or merchant supplier – a focused national security portfolio, and competitive momentum from LHX NeXt, we're confident in our path to sustained profitable growth and long-term value creation.' Susquehanna raised the firm's price target on L3Harris to $320 from $300 and maintained a Positive rating on the shares. The firm updated its model following the Q2 results while noting concurrent with earnings, certain 2025 guidance items and 2026 target items were increased. Susquehanna believes the company is well positioned to benefit from domestic defense spending priorities, including Golden Dome, missile capabilities, and resilient communications. Textron (TXT) also beat expectations in the second quarter and maintained its full-year 2025 EPS guidance. 'In the quarter, we saw revenue growth in both our commercial aircraft and helicopter businesses, as well as in Bell's FLRAA program, now known as the MV-75,' said CEO Scott Donnelly. 'At Textron Aviation, operations continued to improve as production ramped.' Susquehanna increased its price target on Textron to $95 from $90 and reiterated a Positive rating on the shares. The firm said 2Q25 results beat estimates with revenue of $3.72bn and EPS of $1.55 and noted the company continues to see broad-based demand across the Aviation portfolio. General Dynamics (GD) noted that Q2 results exceeded their expectations, The company surpassed analyst expectations as well. 'During the first half of the year, each of our four segments achieved growth in revenue and earnings, with margins on a companywide basis expanding 50 basis points over the same period last year,' said Phebe Novakovic, chairman and chief executive officer. 'Our strong cash flow and healthy backlog position us well to have a good second half.' Wolfe Research upgraded General Dynamics to Outperform from Perform with a $360 price target. The firm cited the company's Q2 beat with an improved free cash flow and order outlook for the upgrade. The quarter 'should be the beginning and not the end,' the analyst told investors in a research note. Wolfe sees an additional 14% upside in the shares. Lockheed Martin (LMT), on the other hand, fell short of consensus in Q2, citing the negative impact of pre-tax losses on programs of $1.6B and other charges of $169M. While the company did cut FY25 EPS guidance, it maintained its FY25 revenue outlook. Lockheed Martin chairman, president and CEO Jim Taiclet commented, 'Based in part on this record of performance as well as the promise of several advanced technologies in development, our U.S. and allied customers are asking us to elevate and accelerate many key programs. For example, several allied nations have recently announced additional F-35 purchases, the U.S. Army has awarded more than $1 billion in missile-related contracts so far, and the U.S. Space Force is ordering additional GPS IIIF satellites. At the same time, our ongoing program review process identified new developments that caused us to re-evaluate the financial position on a set of major legacy programs. As a result, we are taking a number of charges this quarter to address these newly identified risks. We remain committed to delivering these critical capabilities that our customers are counting on and are fully focused on the growth inflection we expect as the result of heightened interest and demand for Lockheed Martin's products and technologies.' RBC Capital lowered the firm's price target on Lockheed Martin to $440 from $480 and kept a Sector Perform rating on the shares. Lockheed Martin's Q2 results were 'soft,' with $1.6B of program losses driving a 78% miss in EPS, the analyst noted. The path to free cash flow growth over the next few years is challenged, the firm said. RTX (RTX) beat Q2 expectations, cut its FY25 EPS view and raised its FY25 revenue outlook. 'We continued our momentum in the second quarter with organic sales and profit growth* across all three segments, including 16 percent commercial aftermarket growth,' said RTX chairman and CEO Chris Calio. 'Our backlog grew to $236 billion, up 15 percent versus prior year, and we secured major awards for our geared turbofan engines and integrated air and missile defense capabilities in the quarter.' Morgan Stanley elevated its price target on RTX to $180 from $165 and keeps an Overweight rating on the shares. The firm named the stock its 'Top Pick in Aerospace' after the company reported a Q2 beat. Given its strong underlying fundamentals and demand across its end markets, RTX should be able to narrow the valuation gap to premium peers, the analyst argued. Northrop Grumman (NOC) exceeded street expectations in Q2, noting its EPS included a $1.04 benefit from the training services divestiture completed in the quarter. 'The Northrop Grumman team delivered a strong second quarter, with increased sales and outstanding operating performance,' said Kathy Warden, chair, chief executive officer and president. 'We continue to see growing demand globally for our broad range of product offerings, which resulted in 18% international sales growth in the quarter. With confidence in our team and our ability to deliver for our customers, we are increasing our full-year guidance for segment operating income, EPS and free cash flow.' BTIG boosted the firm's price target on Northrop Grumman to $630 from $575 and backed a Buy rating on the shares following the quarterly results. Northrop Grumman remains one of the best ways to play the growth in international defense spending at the large-cap level, the analyst contended.
Yahoo
24-07-2025
- Business
- Yahoo
L3Harris stock moves higher as solid Q2 print fuels 2025 guidance hike
-- L3Harris Technologies (NYSE:LHX) shares advanced 2% in premarket trading Thursday after the U.S. defense contractor raised its full-year outlook following stronger-than-expected results in the second quarter. Earnings per share (EPS) in Q2 came in at $2.78, beating the consensus estimate of $2.48. Revenue rose to $5.4 billion, also slightly ahead of the expected $5.32 billion. The company reported $8.3 billion in orders during the quarter, resulting in a book-to-bill ratio of 1.5. Operating margin stood at 10.5%, while the adjusted segment operating margin was 15.9%. 'We delivered impressive second-quarter results, led by a record book-to-bill of 1.5x, solid organic growth, and year-over-year adjusted segment operating margin expansion for the seventh consecutive quarter," said Christopher E. Kubasik, Chair and CEO of L3Harris. "This marks a clear inflection point, with our strongest top-line growth in six quarters and meaningful progress towards our 2026 Financial Framework," he added. L3Harris lifted its full-year 2025 EPS guidance to a range of $10.40 to $10.60, up from the previous $10.30 to $10.50, and in line with the $10.50 consensus. Revenue is now expected to reach approximately $21.75 billion, compared with the earlier outlook of $21.4 billion to $21.7 billion. The company also raised its cash flow forecast to about $2.65 billion, up from the prior range of $2.4 billion to $2.5 billion. Related articles L3Harris stock moves higher as solid Q2 print fuels 2025 guidance hike Risks Rising? Smart Money Dodged 46%+ Drawdowns on These High-Flying Names After soaring 149%, this stock is back in our AI's favor - & already +25% in July
Business Wire
24-07-2025
- Business
- Business Wire
L3Harris Technologies Reports Strong Second Quarter 2025 Results, Increases 2025 Guidance
MELBOURNE, Fla.--(BUSINESS WIRE)--L3Harris Technologies (NYSE: LHX) reported second quarter 2025 diluted EPS of $2.44 on second quarter 2025 revenue of $5.4 billion. Second quarter 2025 non-GAAP diluted EPS was $2.78. Reconciliations of non-GAAP results are detailed in tables beginning on page 11. 'We delivered impressive second-quarter results, led by a record book-to-bill of 1.5x, solid organic growth, and year-over-year adjusted segment operating margin expansion for the seventh consecutive quarter. This marks a clear inflection point, with our strongest top-line growth in six quarters and meaningful progress towards our 2026 Financial Framework. Our Trusted Disruptor strategy continues to drive differentiated, mission-critical solutions that meet our customers' evolving needs while creating value for shareholders,' said Christopher E. Kubasik, Chair and CEO. Kubasik added, 'Defense is entering a generational investment cycle, as U.S. and allied budgets grow rapidly. Demand is accelerating, and our portfolio is aligned with key growth areas – Golden Dome, space, missiles, shipbuilding, autonomy, and resilient communications. With the flexibility of our business-model agnostic approach – able to win as a prime, sub, or merchant supplier – a focused national security portfolio, and competitive momentum from LHX NeXt, we're confident in our path to sustained profitable growth and long-term value creation.' ___ *Organic revenue, adjusted segment operating margin and non-GAAP diluted EPS are non-GAAP financial measures defined on page 16. Expand SUMMARY FINANCIAL RESULTS* Second Quarter Year to Date 2025 Guidance ($ millions, except per share data) 2025 20241 Change 2025 20241 Change Revenue (see Table 4 for organic revenue) Communication Systems $ 1,376 $ 1,346 $ 2,728 $ 2,640 Integrated Mission Systems 1,622 1,671 3,214 3,298 Space & Airborne Systems 1,787 1,707 3,398 3,458 Aerojet Rocketdyne 698 633 1,327 1,217 Corporate eliminations (57) (58) (109) (103) Revenue $ 5,426 $ 5,299 2% $ 10,558 $ 10,510 —% ~$21.75B (Prior: $21.4B - 21.7B) Operating income Communication Systems 336 329 681 639 Integrated Mission Systems 214 200 417 385 Space & Airborne Systems 220 215 396 431 Aerojet Rocketdyne 93 81 169 158 Unallocated corporate expenses (292) (349) (567) (759) Operating income $ 571 $ 476 $ 1,096 $ 854 Adjusted segment operating income $ 863 $ 825 5% $ 1,663 $ 1,613 3% Margin Operating margin 10.5% 9.0% 10.4% 8.1% Adjusted segment operating margin 15.9% 15.6% 30 bps 15.8% 15.3% 50 bps mid - high 15% Tax rate Effective tax rate (GAAP) 12.6% 5.9% 14.1% 4.1% Effective tax rate (non-GAAP) 9.5% 7.8% 11.5% 6.7% EPS Diluted EPS $ 2.44 $ 1.92 $ 4.48 $ 3.40 Non-GAAP diluted EPS $ 2.78 $ 2.40 16% $ 5.18 $ 4.64 12% $10.40 - $10.60 (Prior: $10.30 - $10.50) Pension adjusted non-GAAP diluted EPS $ 2.42 $ 1.98 22% $ 4.38 $ 3.79 16% Diluted weighted-average common shares outstanding 187.8 190.6 188.5 190.8 Cash flow Cash from operations $ 640 $ 754 (15%) $ 598 $ 650 (8%) Adjusted free cash flow $ 574 $ 714 (20%) $ 502 $ 558 (10%) ~$2.65B (Prior: $2.4B - $2.5B) *A reconciliation of adjusted segment operating income and margin, non-GAAP effective tax rate, diluted EPS and pension adjusted diluted EPS, and adjusted free cash flow on a forward-looking basis to GAAP is not available without unreasonable effort due to the unavailability of items for exclusion from the GAAP measure. We are unable to address the probable significance of this information, the variability of which may have a significant impact on future GAAP results. See Non-GAAP Financial Measures on page 7 for more information. 1 2024 segment financial results recast to reflect strategic realignment of the Fuzing and Ordnance Systems (FOS) business from Integrated Mission Systems to Aerojet Rocketdyne, effective in 2025. See Table 9 - 2024 Segment Recast in our EX-99.1 Earnings Release for first quarter 2025. Expand Revenue: Second quarter revenue increased 2%, 6% organically, reflecting growth across all segments, primarily from higher volumes, new program ramps and increased international demand. Operating Margin: GAAP Operating Margin: Second quarter increased 150 bps to 10.5% primarily driven by lower unallocated corporate expenses, including lower LHX NeXt implementation costs, amortization of acquisition-related intangibles and the absence of business divestiture-related losses and impairment of goodwill that impacted 2024. Adjusted Segment Operating Margin: Second quarter expanded 30 bps to 15.9% primarily driven by monetization of legacy end-of-life assets, aligned with our transformation and value creation priorities, and LHX NeXt driven cost saving across all segments, partially offset by impacts from higher margin Commercial Aviation Solutions (CAS) divestiture. Diluted EPS: GAAP Diluted EPS: Second quarter increased 27% to $2.44 driven by higher operating income and lower interest expense from decreased average outstanding short-term debt balances during second quarter 2025, partially offset by a higher effective tax rate. Non-GAAP Diluted EPS and Pension Adjusted Non-GAAP Diluted EPS: Second quarter increased 16% to $2.78 and 22% to $2.42, respectively, from higher adjusted segment operating income and lower interest expense from decreased average outstanding short-term debt balances during second quarter 2025, partially offset by a higher effective tax rate. Cash Flow: Cash From Operations: Second quarter decreased 15% to $640 million driven by working capital timing and cash used for settlement of a longstanding legal matter, partially offset by growth in operating income. Adjusted Free Cash Flow: Second quarter decreased 20% to $574 million, driven by working capital timing, cash used for settlement of a longstanding legal matter, partially offset by growth in operating income and lower capital expenditures. SEGMENT RESULTS* Communication Systems Second Quarter Year to Date 2025 Guidance ($ millions) 2025 2024 Change 2025 2024 Change Revenue $ 1,376 $ 1,346 2% $ 2,728 $ 2,640 3% $5,600 - $5,700 Operating margin 24.4% 24.4% — bps 25.0% 24.2% 80 bps ~25% Expand Revenue: Second quarter revenue increased 2% primarily driven by increased international demand for resilient communication equipment and related waveforms. Operating Margin: Second quarter operating margin was flat, reflecting higher volume and LHX NeXt driven cost savings, partially offset by the absence of the favorable impact of legal settlements that impacted 2024. Integrated Mission Systems Second Quarter Year to Date 2025 Guidance ($ millions) 2025 2024 Change 2025 2024 Change Revenue $ 1,622 $ 1,671 (3)% $ 3,214 $ 3,298 (3)% ~$6,400 (Prior: ~$6,300) Operating margin 13.2% 12.0% 120 bps 13.0 % 11.7% 130 bps ~12% (Prior: high 11%) Expand Revenue: Second quarter revenue decreased 3%, reflecting the divestiture of our CAS business in the first quarter of 2025. Excluding the divestiture impact, organic revenue increased 6% primarily due to ISR classified program ramp. Operating Margin: Second quarter operating margin increased 120 bps to 13.2% primarily due to monetization of legacy end-of-life assets, aligned with our transformation and value creation priorities, partially offset by an unfavorable EAC adjustment from the resolution of a contract matter related to lower utilization on the Canadian Maritime Helicopter Program as it nears completion and impact from divestiture of our CAS business. *Organic revenue is a non-GAAP financial measure defined on page 16. Expand Space and Airborne Systems Second Quarter Year to Date 2025 Guidance ($ millions) 2025 2024 Change 2025 2024 Change Revenue $ 1,787 $ 1,707 5% $ 3,398 $ 3,458 (2)% ~$7,100 (Prior: $6,900 - $7,100) Operating margin 12.3% 12.6% (30) bps 11.7% 12.5% (80) bps low 12% Expand Revenue: Second quarter revenue increased 5%, including the impact from the divestiture of our antenna business in the second quarter of 2024. Excluding the divestiture impact, organic revenue increased 7%, primarily from increased FAA volume in our Mission Networks business and higher volume and improved program performance in our Airborne Combat Systems business, partially offset by lower volumes in our Space Systems and Intel and Cyber businesses associated with program timing. Operating Margin: Second quarter operating margin decreased 30 bps to 12.3% primarily from unfavorable mix, partially offset by monetization of legacy end-of-life assets aligned with our transformation and value creation priorities, improved program performance and LHX NeXt driven cost savings. Aerojet Rocketdyne Second Quarter Year to Date 2025 Guidance ($ millions) 2025 2024 Change 2025 2024 Change Revenue $ 698 $ 633 10% $ 1,327 $ 1,217 9% ~$2,800 Operating margin 13.3% 12.8 % 50 bps 12.7% 13.0 % (30) bps mid 12% Expand Revenue: Second quarter revenue increased 10%, including the impact from the divestiture of our AOT business in the fourth quarter of 2024. Excluding the divestiture impact, organic revenue increased 12% from increased production volume across key missile and munitions programs and new program ramp. Operating Margin: Second quarter operating margin increased 50 bps to 13.3%, primarily due to improved performance driven by LHX NeXt driven cost savings and a favorable contract resolution. *Organic revenue is a non-GAAP financial measure defined on page 16. Expand 2025 NON-GAAP EPS GUIDANCE BRIDGE Our updated 2025 non-GAAP diluted EPS guidance reflects an increase of 200 to 300 basis points to the effective tax rate, resulting in a headwind of ~$0.30 at the midpoint. This impact is more than offset by strong first-half performance and increased guidance, driving a net increase of $0.10 to our full-year non-GAAP diluted EPS guidance. 2025 Guidance Non-GAAP diluted EPS (Prior) $10.30 - $10.50 H1 2025 performance and guidance update ~0.40 Non-GAAP EPS (Before tax reform impact) $10.70 - $10.90 Impact of tax reform ~(0.30) Non-GAAP diluted EPS (New)1 $10.40 - $10.60 Expand SUPPLEMENTAL INFORMATION 2025 Other Information Current Prior FAS/CAS operating adjustment ~$15 million ~$15 million Non-service FAS pension income ~$285 million ~$270 million Net interest expense ~$600 million ~$600 million Effective tax rate on non-GAAP income1 13.5% - 14.5% 11.0% - 12.0% Weighted-average diluted shares ~188 188 - 189 Capital expenditures ~2% revenue ~2% revenue 1Non-GAAP diluted EPS and effective tax rate on non-GAAP income are non-GAAP financial measures defined on page 16. A reconciliation of non-GAAP diluted EPS and effective tax rate on non-GAAP income guidance is not available. See Non-GAAP Financial Measures on page 7 for more information. Expand Forward-Looking Statements This earnings release contains forward-looking statements within the meaning of federal securities laws made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Examples include, but are not limited to: share repurchases; divestiture and realignment impacts; 2025 guidance; budget increases; anticipated LHX NeXt initiative costs and savings; supplemental information for 2025; projection of other financial items; and assumptions underlying any of the foregoing. Investors should not place undue reliance on forward-looking statements, which reflect management's current expectations, estimates, projections, assumptions and information currently available to management, and are not guarantees of future performance or actual results. Important risks that could cause our results to differ materially from those expressed in or implied by these forward-looking statements or from our historical results include, but are not limited to, risks arising from: competitive markets; U.S. Government spending priorities; changes in contract mix; inflation; tariffs and potential trade disputes; unilateral contract action by the U.S. Government; uncertain economic conditions; future geo-political events; supply chain disruptions; impacts of LHX NeXt; indebtedness; defined benefit plan liabilities and returns; interest rates and other market factors; changes in effective tax rate or additional tax exposures; pending and contemplated divestitures. These and other important risks that could impact forward-looking statements are described more fully in the "Risk Factors" in our Form 10-K for fiscal 2024 and our Form 10-Q for Q1 2025 filed with the SEC. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section, and we have no duty to and disclaim any intention or obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events or developments or otherwise. Non-GAAP Financial Measures Management believes the adjustments to non-GAAP Financial Measures ("NGFMs") in the tables beginning on page 13 are useful to investors because the excluded costs do not reflect our ongoing operating performance. Such adjustments, considered together with the unadjusted GAAP financial measures, provide information that management believes is useful to investors to understand period-over-period operating results separate from items that management believes may disproportionately impact operating results in any particular period; however there is no guarantee that items excluded from NGFMs will not reoccur in future periods. Management also believes that NGFMs enhance the ability of investors to analyze business trends, understand performance and evaluate our initiatives to drive improved financial performance. Management utilizes NGFMs to guide forecasting and long-term planning and for compensation purposes. NGFMs should be considered in addition to, and not as a substitute for, financial measures presented in accordance with GAAP. A reconciliation of forward-looking NGFMs to GAAP is not available without unreasonable effort because of inherent difficulty in forecasting and quantifying comparable GAAP measures and applicable adjustments and other amounts necessary for a reconciliation because of potentially high variability, complexity and low visibility of applicable adjustments and other unusual amounts that could disproportionately impact future GAAP results, such as the impact of defined benefit plan performance, LHX NeXt, portfolio shaping activities, and the extent of tax deductibility. Table 1 - Condensed Consolidated Statement of Operations (Unaudited) Second Quarter Year to Date ($ millions, except per share amounts) 2025 2024 2025 2024 Revenue $ 5,426 $ 5,299 $ 10,558 $ 10,510 Cost of revenue (4,091 ) (3,939 ) (7,873 ) (7,802 ) General and administrative expenses (764 ) (884 ) (1,589 ) (1,854 ) Operating income 571 476 1,096 854 Non-service FAS pension income and other, net1 105 86 189 174 Interest expense, net (152 ) (172 ) (302 ) (348 ) Income before income taxes 524 390 983 680 Income taxes (66 ) (23 ) (139 ) (28 ) Net income 458 367 844 652 Noncontrolling interests, net of income taxes — (1 ) — (3 ) Net income attributable to L3Harris $ 458 $ 366 $ 844 $ 649 Earnings per share attributable to common shareholders Basic $ 2.45 $ 1.93 $ 4.50 $ 3.42 Diluted $ 2.44 $ 1.92 $ 4.48 $ 3.40 Weighted-average common shares outstanding Basic 187.0 189.7 187.7 189.8 Diluted 187.8 190.6 188.5 190.8 1'FAS' is defined as Financial Accounting Standards. Expand Table 2 - Consolidated Statement of Cash Flow (Unaudited) Second Quarter Year to Date ($ millions) 2025 2024 2025 2024 Operating Activities Net income $ 458 $ 367 $ 844 $ 652 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 303 319 604 639 Share-based compensation 29 27 48 53 Net periodic benefit income (66 ) (71 ) (150 ) (143 ) Share-based matching contributions under defined contribution plans 68 72 136 142 Deferred income taxes (5 ) (136 ) (94 ) (247 ) (Increase) decrease in: Receivables, net 64 (32 ) (383 ) (25 ) Contract assets (214 ) 175 (634 ) (165 ) Inventories, net (6 ) 27 86 6 Other current assets (3 ) (36 ) (22 ) (26 ) Increase (decrease) in: Accounts payable (14 ) (209 ) 38 (200 ) Contract liabilities 193 14 177 (138 ) Compensation and benefits 130 69 25 (101 ) Other current liabilities (279 ) 103 (268 ) 85 Income taxes 48 108 321 211 Other operating activities (66 ) (43 ) (130 ) (93 ) Net cash provided by operating activities 640 754 598 650 Investing Activities Capital expenditures (88 ) (97 ) (147 ) (212 ) Proceeds from sales of businesses, net of cash divested — 158 831 158 Other investing activities 10 (3 ) (18 ) (4 ) Net cash (used in) provided by investing activities (78 ) 58 666 (58 ) Financing Activities Proceeds from issuances of long-term debt, net — 4 — 2,241 Repayments of long-term debt (606 ) (357 ) (611 ) (2,607 ) Change in commercial paper, maturities under 90 days, net 450 171 470 497 Proceeds from commercial paper, maturities over 90 days — 208 — 688 Repayments of commercial paper, maturities over 90 days — (480 ) — (685 ) Repurchases of common stock (253 ) (89 ) (822 ) (322 ) Dividends paid (225 ) (221 ) (453 ) (445 ) Other financing activities 24 20 1 33 Net cash (used in) provided by financing activities (610 ) (744 ) (1,415 ) (600 ) Effect of exchange rate changes on cash and cash equivalents 13 2 18 (5 ) Net decrease in cash and cash equivalents (35 ) 70 (133 ) (13 ) Cash and cash equivalents, beginning of period 517 477 615 560 Cash and cash equivalents, end of period $ 482 $ 547 $ 482 $ 547 Expand Table 3 - Condensed Consolidated Balance Sheet (Unaudited) ($ millions) June 27, 2025 January 3, 2025 Assets Current assets Cash and cash equivalents $ 482 $ 615 Receivables, net 1,437 1,072 Contract assets 3,857 3,230 Inventories, net 1,258 1,330 Income taxes receivable 93 379 Other current assets 481 461 Assets of business held for sale — 1,131 Total current assets 7,608 8,218 Non-current assets Property, plant and equipment, net 2,742 2,806 Goodwill 20,372 20,325 Intangible assets, net 7,261 7,639 Deferred income taxes 89 120 Other non-current assets 3,168 2,893 Total assets $ 41,240 $ 42,001 Liabilities and equity Current liabilities Short-term debt $ 985 $ 515 Current portion of long-term debt, net 141 640 Accounts payable 2,033 2,005 Contract liabilities 2,317 2,142 Compensation and benefits 444 419 Other current liabilities 1,402 1,677 Liabilities of business held for sale — 235 Total current liabilities 7,322 7,633 Non-current liabilities Long-term debt, net 10,976 11,081 Deferred income taxes 800 942 Other non-current liabilities 2,864 2,766 Total liabilities 21,962 22,422 Total equity 19,278 19,579 Total liabilities and equity $ 41,240 $ 42,001 Expand Reconciliation of Non-GAAP Financial Measures Table 4 - Organic Revenue Reconciliation (Unaudited) Second Quarter 2025 2024 ($ millions) GAAP Adjustments Organic GAAP Adjustments1 Organic CS $ 1,376 — $ 1,376 $ 1,346 — $ 1,346 IMS 1,622 — 1,622 1,671 (138 ) 1,533 SAS 1,787 — 1,787 1,707 (32 ) 1,675 AR 698 — 698 633 (12 ) 621 Corporate eliminations (57 ) — (57 ) (58 ) — (58 ) Revenue $ 5,426 $ — $ 5,426 $ 5,299 $ (182 ) $ 5,117 Year to Date 2025 2024 ($ millions) GAAP Adjustments Organic GAAP Adjustments1 Organic CS $ 2,728 $ — $ 2,728 $ 2,640 $ — $ 2,640 IMS 3,214 — 3,214 3,298 (138 ) 3,160 SAS 3,398 — 3,398 3,458 (76 ) 3,382 AR 1,327 — 1,327 1,217 (20 ) 1,197 Corporate eliminations (109 ) — (109 ) (103 ) — (103 ) Revenue $ 10,558 $ — $ 10,558 $ 10,510 $ (234 ) $ 10,276 1Adjustment to exclude amounts attributable to divested businesses. Expand Table 5 - Reconciliation of Operating Income to Adjusted Segment Operating Income (Unaudited) Second Quarter Year to Date ($ millions) 2025 2024 2025 2024 Operating income $ 571 $ 476 $ 1,096 $ 854 Unallocated corporate department items Amortization of acquisition-related intangibles 193 215 387 432 Unallocated corporate department expense, net 50 33 65 66 FAS/CAS operating adjustment (3 ) (6 ) (6 ) (13 ) Total unallocated corporate department items 240 242 446 485 Significant and/or non-recurring items: Merger, acquisition, and divestiture-related expenses1 13 21 30 61 Business divestiture-related losses and impairment of goodwill1 — 38 17 38 LHX NeXt implementation costs1 39 48 74 175 Total significant and/or non-recurring items 52 107 121 274 Unallocated corporate expenses 292 349 567 759 Adjusted segment operating income $ 863 $ 825 $ 1,663 $ 1,613 1Refer to Key Terms and Non-GAAP Definitions on page 16. Expand Table 6 - Reconciliation of Effective Tax Rate to Effective Tax Rate on Non-GAAP Income (Unaudited) Second Quarter 2025 2024 ($ millions) Earnings Before Tax Tax Expense (Benefit) Effective Tax Rate Earnings Before Tax Tax Expense Effective Tax Rate Income before income taxes $ 524 $ 66 12.6 % $ 390 $ 23 5.9 % Merger, acquisition, and divestiture-related expenses1 13 3 21 7 Business divestiture-related losses and impairment of goodwill1 — (18 ) 38 (2 ) LHX NeXt implementation costs1 39 4 48 11 Non-GAAP income before income taxes $ 576 $ 55 9.5 % $ 497 $ 39 7.8 % Year to Date 2025 2024 ($ millions) Earnings Before Tax Tax Expense (Benefit) Effective Tax Rate Earnings Before Tax Tax Expense Effective Tax Rate Income before income taxes $ 983 $ 139 14.1 % $ 680 $ 28 4.1 % Merger, acquisition, and divestiture-related expenses1 30 4 61 16 Business divestiture-related losses and impairment of goodwill1 17 (23 ) 38 (2 ) LHX NeXt implementation costs1 74 7 175 22 Non-GAAP income before income taxes $ 1,104 $ 127 11.5 % $ 954 $ 64 6.7 % 1Refer to Key Terms and Non-GAAP Definitions on page 16. Expand Table 7 - Reconciliation of Diluted EPS to Non-GAAP Diluted EPS and Pension Adjusted Non-GAAP Diluted EPS (Unaudited) Second Quarter Year to Date ($ millions, except per share data) 2025 2024 2025 2024 Diluted weighted-average common shares outstanding 187.8 190.6 188.5 190.8 Diluted EPS $ 2.44 $ 1.92 $ 4.48 $ 3.40 Significant and/or non-recurring items included in diluted EPS above: Merger, acquisition, and divestiture-related expenses1 0.07 0.11 0.16 0.32 Business divestiture-related losses and impairment of goodwill1 — 0.20 0.09 0.20 LHX NeXt implementation costs1 0.21 0.25 0.39 0.92 Income taxes on above adjustments and other, net2 0.06 (0.08 ) 0.06 (0.20 ) Non-GAAP diluted EPS2 $ 2.78 $ 2.40 $ 5.18 $ 4.64 Less: per share impact of: FAS/CAS operating adjustment3 (0.01 ) (0.03 ) (0.03 ) (0.06 ) Non-service FAS pension income3 (0.35 ) (0.39 ) (0.77 ) (0.79 ) Pension adjusted non-GAAP diluted EPS $ 2.42 $ 1.98 $ 4.38 $ 3.79 1Refer to Key Terms and Non-GAAP Definitions on page 16. 2Second quarter 2024 amount updated to exclude adjustment of $1.13 per share and $0.29 per share for amortization of acquisition-related intangible assets and related income tax expense, respectively. Year to date 2024 amount updated to exclude adjustment of $2.26 per share and $0.60 per share for amortization of acquistion-related intangible assets and related income tax expense, respectively. 3Net of tax effect. Expand Table 8 - Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow (Unaudited) Second Quarter Year to Date ($ millions) 2025 2024 2025 2024 Net cash provided by operating activities $ 640 $ 754 $ 598 $ 650 Capital expenditures (88 ) (97 ) (147 ) (212 ) Proceeds from disposal of property, plant and equipment, net 9 — 9 — Free cash flow 561 657 460 438 Cash used for merger, acquisition and severance1 13 57 42 120 Adjusted free cash flow $ 574 $ 714 $ 502 $ 558 1Refer to Key Terms and Non-GAAP Definitions on page 16. Expand Key Terms and Non-GAAP Definitions Description Definition Merger, acquisition, and divestiture-related expenses Transaction and integration expenses associated with the AJRD acquisition; external costs related to pursuing acquisition and divestiture portfolio optimization; non-transaction costs related to divestitures; and salaries of employees in roles dedicated to planned divestiture and acquisition activity. Business divestiture-related losses and impairment of goodwill In 2024, includes loss on sale and impairment of goodwill recognized in connection with the sale of our antenna and related businesses and a loss associated with the then pending divestiture of our Commercial Aviation Solutions business. In 2025, includes loss recognized in connection with the sale of our Commercial Aviation Solutions business. LHX NeXt implementation costs Costs related to the LHX NeXt initiative are expected to continue into 2026 and are expected to include workforce optimization costs and incremental IT expenses for implementation of new systems, third-party consulting expenses and other related costs, including costs related to personnel dedicated to this project. Organic revenue* Excludes the impact of completed divestitures and is reconciled in Table 4. Orders Total value of funded and unfunded contract awards received from the U.S. Government and other customers, including incremental funding and adjustments to previous awards, excluding unexercised contract options and potential orders under ordering-type contracts, such as indefinite delivery, indefinite quantity (IDIQ) contracts. Non-GAAP income before income taxes* Represents income before income taxes adjusted for items reconciled in Table 6. Effective tax rate on non-GAAP income* Represents the effective tax rate (tax expense as a percentage of income before income taxes) adjusted for the tax effect of items reconciled in Table 6. Adjusted segment operating income and margin* On a consolidated basis represents operating income and margin, excluding unallocated corporate department items and items reconciled in Table 5. Non-GAAP diluted EPS* Represents EPS (earnings per share attributable to common shareholders) adjusted for items reconciled in Table 7. Pension adjusted non-GAAP diluted EPS* Represents Non-GAAP diluted EPS, described above, adjusted for the after tax per share impact of the FAS/CAS operating adjustment and Non-service FAS pension income reconciled in Table 7. Adjusted free cash flow* Net cash provided by operating activities less capital expenditures, plus proceeds from disposal of property, plant and equipment and cash used for merger, acquisition and severance reconciled in Table 8. Cash used for merger, acquisition, and severance* Cash related to merger, acquisition and divestiture-related expenses (described above) and severance costs included in LHX NeXt implementation costs. _____ *Refer to Non-GAAP Financial Measures on page 7 for more information. Expand
