L3 Technologies Wins $27.7M T-1A Aircraft Modification Deal

L3 Technologies Inc (NYSE:LLL) announced that its business unit has been awarded a $27.7-million modification contract for T-1A aircraft from the U.S. Air Force. Per the terms of the deal, the company will provide contractor-operated maintained supply services, over and above, on-equipment maintenance along with data and field service representatives. Work related to the contract will be carried out at multiple locations and are expected to be concluded by Jan 31, 2018.

T-1A aircraft is a medium-range, twin-engine jet trainer aircraft for advanced pilot training. It is used by the Air Force for flying strategic/tactical airlift or tanker aircraft.

L3 Technologies’ Long-Term Strategy

L3 Technologies is transforming its business portfolio to focus more on defense electronics, communications and ISR markets where it has leading positions. The company follows a disciplined divestment strategy to efficiently focus on core operations. The Aerospace Systems (AS) segment of the company delivers integrated solutions for the global ISR market and provides engineering, modernization, upgrade, sustainment, and maintenance and logistics support for a wide variety of aircraft and ground systems.

Additionally, the company is also gaining from inorganic growth. The company has made regular strategic expansions, such as Implant Sciences’ explosives trace detection (ETD) assets. This also includes the acquisition of OceanServer Technology, Inc, a developer and manufacturer of autonomous, lightweight Unmanned Undersea Vehicles (UUVs) in recent times which have further boosted its product portfolio. With the acquisition of Implant Sciences, L3 Technologies’ capabilities in the global aviation security and national security markets were highly enhanced.

Defense Scenario

The defense industry got a heavy boost when the U.S. Senate recently passed fiscal 2018 defense policy bill worth $700 billion, which was proposed in July 2017. This bill provides about $640 billion for Pentagon’s main operations like buying weapons and paying the troops. The remaining $60 billion for Overseas Contingency Operations will be utilized to fund the conflicts in Afghanistan, Iraq, Syria and elsewhere.

This increased budget is expected to rake in more orders for various companies in the industry such as Northrop Grumman Corporation (NYSE:NOC) , Lockheed Martin Corporation (NYSE:LMT) , The Boeing Company (NYSE:BA) etc. which are dealing with different verticals of U.S. Defense.

Price Movement

Shares of L3 Technologies have rallied 25.2% year to date, outperforming the industry’s gain of 22.3%.

This outperformance could be attributed to the company’s strong balance sheet and cash flows which have been providing financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.

Zacks Rank

L3 Technologies currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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