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Deutsche Bank sees 16% upside in L3Harris Technologies, cuts Northrop Grumman as bull thesis 'untenable'

Published 12/15/2023, 11:29 AM
Updated 12/15/2023, 11:33 AM
© Reuters.  Deutsche Bank sees 16% upside in L3Harris Technologies, cuts Northrop Grumman as bull thesis 'untenable'

Deutsche Bank upgraded shares of L3Harris Technologies (NYSE:LHX) to Buy from Hold and downgraded Northrop Grumman (NYSE:NOC) to Hold from Buy in separate notes on Friday.

Analysts raised the firm's price target for L3Harris to $240 from $184, representing a potential 16% upside.

Deutsche Bank said it sees a positive revision opportunity and a relative multiple expansion opportunity in LHX, with the revision opportunity stemming from revenue and margin upside.

The multiple expansion opportunity originates from "the bifurcating margin trajectory and downside risk profile compared to other large-cap defense pure-plays," analysts wrote.

On Northrop, analysts lowered the price target to $473 from $541. They said the investment bank's previous investment thesis is "increasingly untenable" in the face of what appears to be incremental cost challenges on the Sentinel program.

"More specifically, the challenges on both of NOC's principal growth pillars—Sentinel and B-21—are making it increasingly clear that the industry-leading sales growth that our investment thesis was predicated on may be substantially driven by profitless growth," analysts wrote. "This calls into question not only the opportunity for margin expansion and positive revisions but also the opportunity for multiple expansion."

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