Howmet vs. L3Harris: Which Aerospace & Defense Stock Should You Bet On?

Howmet Aerospace (HWM) is positioned as a superior investment compared to L3Harris Technologies (LHX) in the aerospace and defense sector. HWM reported robust Q2 2025 commercial aerospace sales up 8% and defense sales up 21% year-over-year, with a projected 32.7% EPS growth for 2025, supported by strong cash flow and shareholder returns. In contrast, LHX, despite securing global defense deals, faces significant headwinds including a high long-term debt of $10.98 billion, labor shortages, and an anticipated 19.9% decline in 2025 EPS, leading to a Zacks Rank of #2 (Buy) for HWM versus #3 (Hold) for LHX.

Analysis

The aerospace and defense sector presents a clear divergence in prospects between Howmet Aerospace (HWM) and L3Harris Technologies (LHX). Howmet demonstrates robust fundamental strength, driven by strong growth in both its commercial and defense segments. In its second quarter of 2025, commercial aerospace sales grew 8% year-over-year, while defense sales surged 21%, supported by strong air travel trends and expansionary U.S. defense appropriations. This operational momentum is reflected in a consensus EPS growth projection of 32.7% for 2025. Furthermore, HWM maintains a healthy balance sheet, with cash and receivables of $545 million significantly exceeding short-term debt of $5 million, enabling substantial shareholder returns, including a $300 million share repurchase in H1 2025 and a 25% dividend increase. In stark contrast, L3Harris, despite securing international defense contracts and possessing key technologies like the HBTSS satellite, is hampered by significant financial and operational risks. The company carries a heavy long-term debt load of $10.98 billion against a cash balance of just $0.48 billion and faces a projected 19.9% EPS decline for 2025. Persistent labor shortages also pose a threat to its operational execution. While HWM's stock has significantly outperformed LHX over the past year (76.9% vs. 20.4%), its forward P/E of 42.42X reflects high expectations, whereas LHX's multiple of 23.61X prices in its challenges.

Key Decisions for Investors

• Investors may favor Howmet Aerospace (HWM) for its superior growth profile, strong free cash flow, and robust shareholder return program, which appear to justify its premium valuation.
• Caution is warranted for L3Harris (LHX) due to its highly leveraged balance sheet, with over $10.9 billion in long-term debt, and a projected 19.9% decline in 2025 EPS, which substantially offsets its solid defense contract pipeline.
• Given the diverging fundamentals, a relative value assessment is critical; the stark contrast between HWM's operational execution and LHX's balance sheet risks could present a potential pairs trade opportunity for investors looking to capitalize on sector dispersion.