Strategic Outperformance in Aerospace Defense: L3Harris Technologies as a Model of Long-Term Compound Growth

The aerospace and defense sector has long been a cornerstone of resilient, long-term growth, driven by geopolitical dynamics, technological innovation, and the inelastic demand for national security infrastructure. Among the sector's standout performers, L3Harris Technologies (LHX) emerges as a compelling case study in strategic outperformance. Over the past 15 years, L3Harris has delivered a total return compound annual growth rate (CAGR) of 15.59% from 2010 to 2025, significantly outpacing the S&P 500's 14.26% total return CAGR during the same period. This outperformance is not accidental but rooted in a disciplined approach to innovation, strategic acquisitions, and institutional-grade earnings consistency. For investors seeking high-conviction, long-term exposure to the defense sector, L3Harris offers a blueprint of how to compound value in a cyclical yet mission-critical industry.

A 15-Year Total Return CAGR of 15.59%: Outperforming the S&P 500

L3Harris's 15-year total return CAGR of 15.59% underscores its ability to compound wealth at a rate exceeding both the broader market and its peers. This figure, which includes reinvested dividends and price appreciation, reflects a trajectory of disciplined capital allocation and sector-specific tailwinds. By contrast, the S&P 500's 14.26% CAGR over the same period-while robust-highlights the relative strength of a company deeply embedded in the defense industrial base.

Shorter-term performance further reinforces this trend. Over the past 12 months, L3Harris surged 33%, outpacing the S&P 500's 16% gain. Year-to-date through November 2025, the stock has risen 28.7%, compared to the index's 10.7%. These figures are not anomalies but part of a broader pattern of outperformance driven by the company's ability to capitalize on its core competencies in aerospace, defense electronics, and mission systems.

Strategic Acquisitions: The Aerojet Rocketdyne Catalyst

A pivotal driver of L3Harris's outperformance has been its strategic acquisition of Aerojet Rocketdyne in 2023 for $4.7 billion. This move expanded the company's portfolio into propulsion and energetics, critical components of modern missile defense and hypersonic systems. The acquisition added $2.3 billion in annualized revenue and a $34.2 billion backlog, positioning L3Harris as a dominant player in propulsion technologies.

The integration of Aerojet Rocketdyne has also enhanced institutional ownership and earnings visibility. Institutional investors, drawn to the company's long-cycle contracts, have increased their stakes, reflecting confidence in its strategic direction. Financial results post-acquisition further validate this optimism: in Q3 2025, L3Harris reported a 15.9% adjusted operating margin and a 1.5x book-to-bill ratio, with organic revenue growth of 6% year-over-year.

Consistent Earnings Growth and Institutional Confidence

L3Harris's earnings trajectory is another pillar of its long-term success. Non-GAAP diluted EPS grew by 10% in Q3 2025, and the company's 15-year EPS CAGR has consistently outpaced revenue growth, a sign of operational efficiency. This earnings discipline, combined with a 7.5% operating margin in 2024, has attracted institutional investors seeking stable, compounding returns.

The company's institutional ownership has also benefited from its reputation as a "blue-chip" defense contractor. With a 10-year total return CAGR of 17.20%, L3Harris has become a staple in institutional portfolios, particularly those focused on sectors with inelastic demand and high barriers to entry.

A Case for Long-Term, High-Conviction Portfolios

For investors with a 10- to 15-year horizon, L3Harris represents a rare combination of defensive resilience and offensive growth. Its 15.59% total return CAGR demonstrates the power of compounding in a sector where demand is driven by geopolitical realities rather than economic cycles. The Aerojet Rocketdyne acquisition has further diversified its revenue streams, reducing reliance on any single market segment while enhancing its technological edge.

Moreover, L3Harris's institutional ownership and earnings consistency provide a buffer against market volatility. In an era of rising defense budgets and technological competition, the company's focus on propulsion, hypersonics, and advanced electronics aligns with global security priorities. As one analyst noted, "L3Harris has transformed from a niche player into a strategic asset", with its acquisition strategy and operational discipline setting a new benchmark for the sector.

Conclusion

L3Harris Technologies exemplifies how strategic acquisitions, earnings discipline, and institutional alignment can drive long-term outperformance in the aerospace defense sector. Its 15.59% total return CAGR over the past decade and a half, coupled with a 15.9% adjusted operating margin in Q3 2025, positions it as a high-conviction holding for investors seeking compounding returns in a mission-critical industry. As global defense spending continues to rise, L3Harris's ability to innovate and scale will likely cement its status as a model of strategic outperformance.