L3Harris Tumbles 4.25% Amid Earnings Disappointment and Sector Volatility—What’s Next for the Defense Giant?

Summary
• L3Harris (LHX) plunges 4.25% intraday to $340.88, marking its worst single-day drop since January 2023.
• FY 2026 revenue guidance raised to $23.0–$23.5B, but Q4 revenue of $5.65B misses consensus by $110M.
• Analysts remain bullish with a $368.67 average target price, but GF Value estimates a 22.42% downside to $265.13.

Today’s sharp decline in L3Harris reflects a mix of near-term execution risks and broader sector jitters. Despite robust long-term fundamentals—including a $38B backlog and a planned Missile Solutions IPO—the stock faces headwinds from a U.S. government shutdown delay and mixed Q4 results. Traders are now parsing technicals and options activity to gauge the next move.

Q4 Revenue Miss and Government Shutdown Spark Sell-Off
L3Harris’s 4.25% intraday drop stems from a combination of near-term operational challenges and market skepticism. The company reported Q4 revenue of $5.65B, falling short of the $5.76B consensus, citing delayed contract awards and payments due to the U.S. government shutdown. While FY 2026 guidance was raised to $23.0–$23.5B, the Q4 miss highlighted top-line pressures. Analysts noted that the shutdown disrupted production timelines, particularly for missile and defense programs, creating uncertainty around near-term revenue recognition. Additionally, the stock’s decline was amplified by broader sector weakness, as defense stocks faced profit-taking after a strong 2025 rally.

Defense Sector Mixed as L3Harris Trails Sector Leader Lockheed Martin
The Aerospace & Defense sector remains polarized, with L3Harris underperforming its peers. Sector leader Lockheed Martin (LMT) rose 1.5% intraday, buoyed by its F-35 production milestones and a $1.5T defense budget outlook. In contrast, L3Harris’s earnings miss and operational delays have created a divergence. While the sector benefits from sustained defense spending, L3Harris’s reliance on government contracts makes it more vulnerable to short-term disruptions. Analysts suggest that L3Harris’s planned Missile Solutions IPO and $1B Pentagon-linked investment could reposition it for long-term growth, but near-term volatility is likely.

Options and ETFs to Watch: Navigating Volatility in a Key Defense Play
• 200-day average: 273.997 (well below current price)
• RSI: 77.26 (overbought territory)
• MACD: 16.00 (bullish divergence)
• Bollinger Bands: Price at 336.925 (middle band), near lower band support at 296.63

L3Harris’s technicals suggest a short-term overbought condition, but the stock remains above key moving averages. Traders should monitor the 336.925 middle Bollinger Band as a pivot level. A break below 330 could trigger a test of the 296.63 lower band, while a rebound above 350 may rekindle bullish momentum. The options chain reveals two high-conviction plays:

1. LHX20260206C345 (Call Option)
• Strike: $345 | Expiration: 2026-02-06 | IV: 23.10% | Leverage: 83.39% | Delta: 0.466 | Theta: -0.8505 | Gamma: 0.0338 | Turnover: 6,892
• Payoff at 5% downside (323.84): $0 (strike not reached).
• Why it stands out: High leverage ratio and moderate delta make this option ideal for a short-term rebound trade. The 23.10% IV suggests reasonable implied volatility, while the -0.8505 theta indicates aggressive time decay, favoring quick directional moves.

2. LHX20260206C347.5 (Call Option)
• Strike: $347.5 | Expiration: 2026-02-06 | IV: 24.16% | Leverage: 104.12% | Delta: 0.389 | Theta: -0.7617 | Gamma: 0.0312 | Turnover: 1,680
• Payoff at 5% downside (323.84): $0 (strike not reached).
• Why it stands out: The 104.12% leverage ratio is among the highest in the chain, offering outsized returns if the stock stabilizes. The 24.16% IV and -0.7617 theta suggest a balance between volatility and time decay, making it a speculative but high-reward play.

Action Plan: Aggressive bulls may consider LHX20260206C345 into a bounce above $350. For a bearish scenario, the 330 put (LHX20260206P330) offers downside protection with a 312.35% leverage ratio.

Backtest L3Harris Stock Performance
The backtest of Lockheed Martin (LHX) after an intraday plunge of -4% from 2022 to the present shows favorable short-to-medium-term performance. The 3-Day win rate is 53.53%, the 10-Day win rate is 55.19%, and the 30-Day win rate is 58.51%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest period was 2.44%, which occurred on day 59, suggesting that while the stock exhibited volatility, it also had periods of recovery and positive performance.

Short-Term Volatility Expected—Focus on 330 Support and Sector Catalysts
L3Harris’s near-term trajectory hinges on its ability to stabilize Q4 operations and capitalize on its FY 2026 guidance. While the stock faces immediate technical resistance at 350 and support at 330, the broader defense sector’s resilience—led by a 1.5% rise in Lockheed Martin—suggests a floor for the stock. Investors should watch for a rebound above 350 to revalidate the bullish case, while a breakdown below 330 could trigger a deeper correction. The planned Missile Solutions IPO and $1B Pentagon investment remain key long-term catalysts. For now, the 330 level is critical: hold for a close above it to re-enter long positions, or consider short-term options like LHX20260206P330 for downside protection.