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L3Harris’ Record Backlog Makes Its Stock Sell-Off Look Overdone
Reported by Thomas Hughes. First Published: 7/31/2026.
Key Points
- L3Harris reported stronger second-quarter revenue, earnings and free cash flow while raising its 2026 outlook.
- A record backlog and strong missile demand support the company’s long-term growth case, even as the stock remains under pressure.
- Investors still need to weigh execution risk, debt, capital returns and the timing of the planned Missile Solutions IPO.
- Special Report: SpaceX is offering you shares. Don't take them.
L3Harris Technologies (NYSE: LHX) is a great example of a massive disconnect in the market. Geopolitical headwinds, macroeconomic fears and general market angst have pushed high-quality stocks into correction territory and bear markets despite otherwise healthy fundamentals and robust growth outlooks. The takeaway for investors is that times aren’t normal: The market is offering massive discounts, and the time to buy is now, before conditions return to normal. When they do, share prices for stocks such as LHX could melt up to higher price points and sustain upward momentum thereafter.
It’s debatable when that will happen, but it will likely occur in the upcoming quarters as summer 2026 comes to an end, smart-money investors return to the market and subsequent data support the outlook for higher valuations. As it stands, the 15 analysts tracked by MarketBeat show relatively high conviction in the Moderate Buy consensus rating. The data show a 73% Buy-side bias, no Sell ratings and nearly 40% upside relative to late-July lows. Among the critical details are that sentiment has remained firm over the trailing 12 months while price targets have strengthened, and the Q2 results provide no reason for those trends to change. What the market gets wrong is that near-term headwinds are merely noise, clouding a robust outlook supported by a record backlog.
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L3Harris Delivered the Quarter Investors Usually Reward
L3Harris had a solid second quarter, generating $5.9 billion in net revenue, up 8.4% year over year and above consensus forecasts. Strength was evident across all segments, with Missile Solutions and Space & Mission leading the growth. More importantly, the company is producing profitable growth, expanding margins and generating robust cash flow. Operating margin improved by 60 basis points, driving a 28% increase in adjusted earnings, aided by share buybacks. Free cash flow, the all-important metric, was also strong, rising 37% and expected to remain robust in the coming quarters.
Guidance is also good news, contrary to the market’s response. The company raised its targets for quarterly and full-year results, with the new forecast supported by healthy internal metrics. New orders increased by $7.3 billion, outpacing billings and producing a book-to-bill ratio of 1.2. The backlog, which stands at a record level, is worth approximately $42 billion, or more than seven quarters of revenue at the Q2 pace. Looking ahead, the company’s forecast may underestimate its growth potential, given its Q2 strength and plans for increased defense spending globally.
Cash Flow Supports the Story, But Risks Remain
L3Harris investors face capital return risk, as the Department of Defense and the Trump administration scrutinize defense contractors and legislation to limit capacity remains under debate. Other risks include the company’s ability to scale production profitably, maintain sufficient free cash flow and secure direct government investment in its expansion capacity. That investment, worth $1 billion, is tied to the company’s Missile Solutions business and engine-production capacity. The question now is whether the segment will be spun off, as suggested earlier in 2026, or remain part of the company.
LHX’s 30% stock-price correction, as of late July, remains an overhang for the market but has likely run its course. The 10% post-release decline following the Q2 earnings report put the stock at long-term lows, aligning with prior support and a critical breakout level that is unlikely to be broken. Additionally, MACD divergence suggests that bearish traders are losing control, setting the stage for a rebound and price recovery in the coming quarters. Institutional data is also favorable, with institutions owning nearly 85% of the stock and accumulating shares ahead of the release. The likely outcome is that they will continue taking advantage of price discounts and help limit downside risk as Q3 progresses.
L3Harris Still Has to Convert Backlog Into Value
This year’s catalysts include scaling its Missile Solutions business and news about the planned spinout. Scaling the business means converting the massive backlog into revenue, outperforming estimates and affirming long-term targets, which suggest that the stock is deeply undervalued. The planned IPO is expected to unlock value by creating pure-play companies focused on Missiles and Space, but it may not happen until mid-2027 or later if market conditions fail to improve.
The company’s biggest risks, aside from macroeconomic factors, are execution and debt. The acquisition of Aerojet Rocketdyne left L3Harris with excessive debt, amplifying execution risks as the company pursues its repositioning efforts. Not only is a planned IPO on the horizon, but noncore assets are also being purged from the Space segment. In this environment, any delays or missteps will be reflected in the stock’s price.
GE Vernova’s AI Power Boom Faces a Profit Test
Reported by Peter Frank. First Published: 8/12/2026.
Key Points
- GE Vernova posted 22% revenue growth and a record $176 billion backlog in the second quarter of 2026, but adjusted earnings per share missed Wall Street estimates.
- Free cash flow surged to $5.1 billion for the quarter, exceeding all of 2025's total, prompting management to raise full-year revenue and cash flow guidance.
- Wind segment losses, tariff costs of $250 million to $350 million, and a trailing price-to-earnings ratio near 30 pose risks despite analysts' Moderate Buy consensus rating.
- Special Report: SpaceX is offering you shares. Don't take them.
Two years after its spinoff from General Electric, GE Vernova (NYSE: GEV) has become a key player in the artificial intelligence buildout.
It doesn’t make chips or software. Instead, the giant industrial company makes the turbines, grid equipment and nuclear technology that help keep AI data centers running.
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Marc Chaikin, founder of Chaikin Analytics, says two forces - AI disruption and fracturing global trade - are triggering a historic wealth transfer already underway in 2026. Household names like Intuit (-57%), Boston Scientific (-49%), and Tractor Supply (-40%) are cratering, while lesser-known companies like Sandisk (+573%) and Rackspace (+444%) surge.
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Watch Marc Chaikin's free presentation and get his full buy-and-sell list todayToday, this nearly $270 billion company is appearing on lists of growth names to watch. Its stock is up about 55% this year, and analysts believe it still has room to run.
But while its latest earnings demonstrated the strength of its business, the report also revealed some soft spots worth watching. Investors may want to understand the full story rather than simply follow the headline numbers and mentions of AI.
Strong Revenue Growth Builds a Record Backlog
GE Vernova reported its second-quarter 2026 results on July 22, showing strong top-line growth but weaker results further down the income statement.
Revenue rose 22% year over year (YOY) to $11.1 billion, comfortably ahead of Wall Street's consensus estimate of $10.79 billion. Orders more than doubled, surging 88% organically to $24.2 billion. That pushed the company's total backlog to $176 billion, up $13 billion in just three months. Management is targeting $200 billion in 2027.
In other words, the outlook is strong because the backlog represents years of future revenue already under contract. In particular, gas turbine capacity booked for slot reservations climbed from 100 gigawatts to 116 gigawatts during the quarter, with management now expecting to reach at least 125 gigawatts by year-end.
Profitability Falls Short of Expectations
Then came the numbers further down the P&L. Adjusted earnings per share came in well below the roughly $3.17 analysts had modeled, even though net income still rose to $649 million, or $2.47 per diluted share, from $492 million, or $1.86 per share, a year earlier.
Adjusted EBITDA grew 62% YOY to $1.25 billion, while the organic margin expanded by 340 basis points to 11.2%. That apparently fell short of Wall Street's expectations because equipment revenue in the electrification and power businesses is growing faster than the more profitable services business.
The power segment reported $16.7 billion in orders, an organic increase of 134%, while revenue of $5.5 billion rose 14%, led by the gas power equipment business. Electrification orders increased 66% organically to $6.3 billion.
Wind orders, however, dropped 40% organically to just $1.2 billion.
In other words, GE Vernova is growing faster than expected but converting that growth into profit more slowly than expected.
Cash Flow Provides a Major Bright Spot
One of the quarter's most impressive figures was cash flow. Free cash flow hit $5.1 billion during the quarter, up $4.9 billion and exceeding the total generated in all of 2025. This was driven largely by customers making larger upfront payments to reserve turbine slots.
That cash generation helped increase the company's cash balance to $13.1 billion, up $4.3 billion from a year earlier. Management has already returned $3.9 billion to shareholders this year through buybacks and a 50-cent quarterly dividend, which currently yields just 0.2%.
Buoyed by that cash generation, management also raised full-year revenue guidance to a range of $45.5 billion to $46.5 billion and increased free cash flow guidance to $11.5 billion to $12.5 billion.
Wind Losses and Valuation Create Risks
Those big numbers, however, do not erase the company's problems. As noted, the first is wind. The segment's quarterly revenue of $2 billion declined 11% organically, and it posted an EBITDA loss of roughly $275 million.
That is part of an expected full-year loss of nearly $400 million, as weak U.S. onshore demand, permitting delays and tariffs continue to weigh on the business. Management has guided to a net tariff impact of $250 million to $350 million for 2026 across the company. Although that cost is included in its guidance, it still represents a painful hit to margins.
The second issue is valuation. With a trailing price-to-earnings ratio near 30, GEV trades well above the levels value investors typically favor. That premium could be difficult to maintain if this type of quarter is repeated.
Competition is another consideration. GE Vernova sits at the center of the AI power story alongside NuScale Power (NYSE: SMR) in nuclear energy. Traditional rivals Siemens Energy and Vestas Wind Systems are competing for global turbine share, while Eaton (NYSE: ETN) competes in the electrification and grid equipment markets, which include some of GE Vernova's fastest-growing businesses.
Analysts Remain Bullish on GE Vernova
Even with these risks, GE Vernova is a powerhouse that has analysts taking a positive view. The stock carries a consensus rating of Moderate Buy from 30 analysts: two Strong Buy ratings, 22 Buy ratings, five Holds and just one Sell.
The average 12-month price target is $1,133.15, implying roughly 10% upside from current levels of about $1,042. The high target is $1,450, while the low target is $580, indicating that analysts see substantial uncertainty around the stock's outlook.
Growth Potential Comes at a Premium
Overall, GE Vernova remains one of the more legitimate ways to invest in the growing electricity demand created by artificial intelligence. Backed by a record backlog, the company’s orders are surging and cash flow is accelerating.
But this is not a value stock trading at a discount. It is priced at a premium and just showed investors that it can still stumble on profitability.
Investors should understand that wind losses, tariff costs and a rich valuation leave little room for error. Revenue growth is likely, but the rest remains to be seen.
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