L3Harris (NYSE: LHX) lifts its EPS outlook and posts a record backlog

Posted by Kim Johansen on Oct 31st, 2026

What happened

L3Harris Technologies, Inc. (NYSE: LHX) raised its 2026 GAAP earnings guidance on Oct. 29 and reported a record backlog of $53.2 billion.

Orders of $19.3 billion in the quarter produced a book-to-bill ratio of 3.2x. For a holder, that is demand turning into signed work, the first step toward profit and cash.

Third-quarter revenue of $6.1 billion rose 7% from a year earlier and 9% on an organic basis. The release credits double-digit growth in Space Mission Systems and Missile Solutions.

Management raised its 2026 revenue range to $23.5 billion to $23.7 billion from $23.2 billion to $23.7 billion, so the floor rose $0.3 billion. GAAP EPS guidance moved to $12.25 to $12.35 from $11.80 to $12.00, a $0.45 higher floor. Free cash flow guidance stayed at $3 billion.

Key numbers

Metric	Latest	Change	Source
Backlog	$53.2 billion		SEC 8-K, Exhibit 99.1
Third-quarter revenue	$6.06 billion	from $5.66 billion, +7%	SEC 8-K, Exhibit 99.1
Diluted EPS	$3.28	from $2.46, +33%	SEC 8-K, Exhibit 99.1
Free cash flow	$1.26 billion	from $427 million, +195%	SEC 8-K, Exhibit 99.1
Operating income margin	13.0%	from 11.0%, +2.0 percentage points	SEC 8-K, Exhibit 99.1
FY26 GAAP EPS guidance (prior $11.80 to $12.00)	$12.25 to $12.35		SEC 8-K, Exhibit 99.1

Where the orders came from

One segment drove the backlog jump. Missile Solutions posted a book-to-bill ratio of 11.8x, against 1.9x for Communications Spectrum Dominance and 1.0x for Space Mission Systems.

The earnings appendix shows Missile Solutions backlog rising to $20.0 billion from $10.5 billion at the end of the second quarter.

Two awards stand out. L3Harris won a seven-year, $6.3 billion contract to scale propulsion production for the Terminal High Altitude Area Defense (THAAD) system. It also won a seven-year, $4.7 billion contract for the PAC-3 Missile Segment Enhancement interceptor. Both amounts exclude escalations, and both contracts are undefinitized.

Smaller awards included a $250 million follow-on contract for GMLRS propulsion units and more than $500 million in VAMPIRE C-UAS orders from the United States and allies. The U.S. Navy also awarded an $876 million contract modification for the Next Generation Jammer Low Band system.

Missile Solutions revenue rose 5% to $1.06 billion. It grew 17% on an organic basis, once the divested Space Technology business is removed from the prior-year base.

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Where the profit gain came from

Profit improved faster than segment margins did. Operating income margin reached 13.0%, up 200 basis points from 11.0%, while segment operating margin was flat at 15.9%. The release credits higher revenue and continued control of corporate expenses.

Unallocated corporate items and other, net, fell to $181 million from $279 million. Amortization of acquisition-related intangibles was $147 million, down from $192 million.

Diluted EPS rose 33% to $3.28 from $2.46. The release credits higher volumes, lower corporate expense, lower interest expense and a lower effective tax rate. Net interest expense was $116 million, down from $152 million. The effective tax rate was 14.9%, down from 18.5%.

Missile Solutions segment operating margin slipped to 12.0% from 12.3% a year earlier, according to the earnings appendix. Management's unchanged guidance for the segment is a low-12% margin.

Cash and the balance sheet

Operating cash flow was $1.4 billion, against $546 million a year earlier. Free cash flow was $1.3 billion, up 195% from $427 million, after capital expenditures of $179 million.

Two working capital lines moved sharply. The cash flow statement shows receivables adding $369 million, against a $91 million use a year earlier. Contract liabilities added $169 million, against an $86 million use. Year-to-date free cash flow is $1.84 billion.

The company ended the quarter with $11.0 billion of total debt, $2.5 billion of cash and $550 million of short-term investments. Share repurchases fell to $73 million from $176 million. Dividends paid rose to $234 million from $225 million.

Why it matters

OptimistFi has argued that L3Harris compounds value if mission-critical defense electronics demand keeps turning into profitable programs and cash faster than procurement pressure, competition and balance-sheet constraints erode returns. This quarter strengthens the demand and cash links, with a record backlog, a raised EPS range and free cash flow far above the prior-year quarter.

Two caveats apply. The THAAD and PAC-3 awards are undefinitized. The release also lists U.S. Government spending priorities, changes in contract mix, unilateral government contract action, supply chain disruptions, indebtedness and interest rates among the risks that could change results.

Segment margin also did not expand, so the profitability link rests on corporate costs, interest and tax.

What's next

L3Harris's next quarterly report will test three things. One is whether free cash flow stays on track for the unchanged full-year guidance. Another is whether segment operating margin holds near its low-16% guidance. The third is whether Missile Solutions turns its larger backlog into revenue at a margin near its low-12% guidance.