L3Harris Technologies Inc.

The stable outlook on L3Harris reflects our expectation for strong earnings and significant free cash flow generation while management seeks to return excess cash to the company's shareholders. This should result in modestly improving credit ratios, with funds from operations (FFO) to debt of 34%-38% in 2020 and 38%-42% in 2021. Although unlikely over the next 12 months, we could raise our rating on L3Harris if its maintains FFO to debt of more than 30% and management commits to supporting ratios at these levels. This could occur if the company continues to realize expected cost synergies and its earnings increase as a result. Although unlikely, we could lower our rating on L3Harris if its FFO to debt falls to below

...Strong defense spending through 2021 positions L3Harris Technologies Inc. for continued organic revenue growth. The most recent budget proposal suggests defense spending will remain strong through government fiscal year 2021, which should support solid demand for L3Harris' services. Although spending is likely to be flat after 2020 and could come under pressure in future years to offset coronavirus spending, the military's increased focus on electronic warfare (EW), intelligence, surveillance, and reconnaissance (ISR), and space creates an opportunity for L3Harris' organic revenue growth to exceed budget growth. As a result, we expect organic revenue growth of 5.5%-6.5% in 2020 and 4%-5% thereafter....

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