Northrop Grumman (NYSE:NOC) & L3Harris (NYSE:LHX) Critical Comparison

Northrop Grumman (NYSE:NOC) and L3Harris (NYSE:LHX) are both large-cap aerospace companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, valuation, risk, institutional ownership, dividends, profitability and earnings.

Volatility and Risk

Northrop Grumman has a beta of 0.81, indicating that its share price is 19% less volatile than the S&P 500. Comparatively, L3Harris has a beta of 0.95, indicating that its share price is 5% less volatile than the S&P 500.

Earnings and Valuation

This table compares Northrop Grumman and L3Harris’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Northrop Grumman $30.10 billion 2.07 $3.23 billion $21.33 17.25
L3Harris $6.80 billion 3.66 $949.00 million $8.29 25.44

Northrop Grumman has higher revenue and earnings than L3Harris. Northrop Grumman is trading at a lower price-to-earnings ratio than L3Harris, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

83.7% of Northrop Grumman shares are owned by institutional investors. Comparatively, 94.9% of L3Harris shares are owned by institutional investors. 0.5% of Northrop Grumman shares are owned by insiders. Comparatively, 2.5% of L3Harris shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Dividends

Northrop Grumman pays an annual dividend of $5.28 per share and has a dividend yield of 1.4%. L3Harris pays an annual dividend of $2.74 per share and has a dividend yield of 1.3%. Northrop Grumman pays out 24.8% of its earnings in the form of a dividend. L3Harris pays out 33.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Northrop Grumman has raised its dividend for 11 consecutive years. Northrop Grumman is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current ratings and price targets for Northrop Grumman and L3Harris, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Northrop Grumman 0 3 13 0 2.81
L3Harris 0 1 8 0 2.89

Northrop Grumman presently has a consensus target price of $345.50, indicating a potential downside of 6.09%. L3Harris has a consensus target price of $235.41, indicating a potential upside of 11.64%. Given L3Harris’ stronger consensus rating and higher probable upside, analysts plainly believe L3Harris is more favorable than Northrop Grumman.

Profitability

This table compares Northrop Grumman and L3Harris’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Northrop Grumman 9.80% 42.21% 9.60%
L3Harris 13.95% 29.27% 10.17%

Summary

L3Harris beats Northrop Grumman on 9 of the 17 factors compared between the two stocks.

About Northrop Grumman

Northrop Grumman Corporation, a security company, provides products in the areas of autonomous systems, cyber, space, strikes, and logistics and modernizations in the United States, the Asia Pacific, and internationally. The company operates through four segments: Aerospace Systems, Innovation Systems, Mission Systems, and Technology Services. The Aerospace Systems segment designs, develops, integrates, and produces manned aircrafts, autonomous systems, spacecraft systems, high-energy laser systems, microelectronics, and other systems and sub-systems for use in the areas of intelligence, surveillance and reconnaissance, strike operations, communications, earth observations, and space science. The Innovation Systems segment designs, develops, integrates, and produces flights, armaments, and space systems. It offers launch vehicles and related propulsion systems; missile products and defense electronics; precision weapons, armament systems, and ammunitions; satellites and associated space components and services; and advanced aerospace structures. The Mission Systems segment offers products and services that include C4ISR systems; radar, electro-optical/infrared (EO/IR), and acoustic sensors; electronic warfare systems; cyber solutions; space systems; intelligence processing systems; air and missile defense integration systems; navigation systems; and shipboard missiles and encapsulated payload launch systems. The Technology Services segment provides logistic solutions that supports the full life cycle of platforms and systems. Its products and services include software and system sustainment; modernization of platform and associated subsystems; advanced training solutions; and integrated logistics support. Northrop Grumman Corporation was founded in 1939 and is based in Falls Church, Virginia.

About L3Harris

L3Harris Technologies, Inc. provides technology-based solutions that solve government and commercial customers' mission-critical challenges in the United States and internationally. The company operates in three segments: Communication Systems, Electronic Systems, and Space and Intelligence Systems. It designs, develops, and manufactures radio communications products and systems, including single channel ground and airborne radio systems, multiband manpack and handheld radios, multi-channel manpack and airborne radios, and single-channel airborne radios, as well as wideband rifleman team, ground, and high frequency manpack radios. The company also offers vision-enhancing products; wireless communications systems; and Internet protocol based voice and data communications systems, as well as single-band land mobile radio terminals and multiband radios comprising a handheld radio and a full-spectrum mobile radio for vehicles. In addition, it provides electronic warfare, avionics, command, control, communications, computers, intelligence, surveillance, and reconnaissance solutions for defense and classified customers; and mission-critical communication systems for civil and military aviation and other customers. Further, the company offers intelligence, space protection, geospatial, earth observation, exploration, positioning, navigation and timing, and environmental solutions using advanced sensors, antennas, and payloads, as well as ground processing and information analytics for national security, defense, civil and commercial customers. The company was formerly known as Harris Corporation and changed its name to L3Harris Technologies, Inc. in June 2019. L3Harris Technologies, Inc. was founded in 1895 and is headquartered in Melbourne, Florida.

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