L3Harris Technologies (LHX) has drawn fresh attention after reporting first quarter 2026 earnings, with sales of US$5,744 million, higher net income, and raised full year revenue and earnings guidance supported by a record defense backlog.

The solid first quarter and raised guidance come after a softer patch in the share price, with a 30-day share price return decline of 13.31% and a 90-day share price return decline of 12.22%, while the 1-year total shareholder return of 43.59% and 3-year total shareholder return of 75.30% point to momentum that has built over a longer horizon.

If defense exposure is on your radar after L3Harris's results, it could be worth broadening your search to other power and communications suppliers using our 36 power grid technology and infrastructure stocks

With L3Harris posting higher Q1 earnings, a record backlog above US$40b, and the stock recently pulling back despite a 1 year total return of 43.59%, some investors may be asking whether there is still value in the shares or whether the current price already reflects expectations for future growth.

Most Popular Narrative: 21.3% Undervalued

At a last close of $308.62 versus a narrative fair value of $392.16, the current price sits below what the prevailing long term model suggests. That view is built around specific revenue, margin and discount rate assumptions.

The company's LHX NeXt initiative focuses on cost optimization and efficiency, leading to potential net margin improvements. Strategic collaborations and partnerships, particularly in AI and resilient communications, are expected to expand L3Harris's market reach and potentially drive future earnings growth.

Curious what kind of revenue path and margin lift would need to materialise to support that valuation, and how much earnings expansion is built into the model.

Result: Fair Value of $392.16 (UNDERVALUED)

However, there is still the risk that reliance on fixed price contracts and other contractors, or tighter U.S. and allied defense budgets, could undermine the earnings path behind this narrative.

Next Steps

All of this leaves a mixed picture, with both risks flagged and clear positives that some investors are focused on. If you want to move quickly and settle on your own view, take a closer look at the 6 key rewards and 2 important warning signs.

Looking for more investment ideas?

If you stop at L3Harris, you risk missing other opportunities that match your goals. Broaden your search with a few focused stock ideas.

• Target potential bargains by scanning companies that combine quality fundamentals with attractive pricing using our 48 high quality undervalued stocks.
• Support your cash flow focus by reviewing income stocks that feature stronger yields and resilient payouts through the 12 dividend fortresses.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.