L3 Technologies Wins $500M Deal To Upgrade C-130H Aircraft

L3 Technologies Inc.’s (NYSE:LLL) subsidiary, L-3 Communications Integrated Systems L.P., recently secured a contract to offer major avionics upgrade for 176 C-130H aircraft operated by the Air National Guard and the Air Force Reserve Command. Work related to the deal is scheduled to be completed by Sep 30, 2029.

Details of the Deal

Valued at $500 million, the contract was awarded by the Air Force Life Cycle Management Center, Wright Patterson, OH. Per the terms of the agreement, L3 Technologies will also engage in engineering and manufacturing development through production as well as offer training and logistics requirements.

The entire task will be executed in Waco, TX.

A Brief Note on C-130H

C-130 Hercules is a legacy combat aircraft manufactured by the military jet maker — Lockheed Martin (NYSE:LMT) . Notably, the C-130 program has the longest, continuous military aircraft production run in history and one of the top three longest, continuous aircraft production lines of any type.

The latest model in Lockheed Martin’s Hercules family — C-130J Super Hercules — is a four-engine turboprop military transport aircraft. It uses updated technology like the new Rolls-Royce (LON:RR) AE 2100 D3 turboprops with Dowty R391 composite scimitar propellers, digital avionics and needs reduced crew.

Our View

In recent times, combat aircraft in the U.S. aerospace-defense market have gained prominence and significant traction due to advancements and integration of new tactical, logistical and other important features. In this regard, it is imperative to mention that L3 Technologies’ Military Aviation Services (MAS) provides modernization and life extension maintenance upgrade and support services for military aircraft. These services include structural modifications and inspections, installation of mission equipment, navigation and avionics products and interior modifications.

As the United States is vigorously spending in defense with military jets constituting a major part of the nation’s allotment, frequent modernizations and upgrades of these jets are in vogue. To date, more than 2,500 C-130s have been ordered worldwide. As a result, defense majors like L3 Technologies are enjoying a steady flow of modernization and upgrade-related deals from the Pentagon and the latest contract win is a testament to that. These, in turn, tend to boost the company’s profit margin.

Meanwhile, the latest defense budget proposal for fiscal 2020 offers investment potential worth $57.7 billion in aircraft. Considering this, we may expect L3 Technologies to obtain similar order flows from the Pentagon in days ahead as the nation strives to remain the top weapons supplier in the world.

Price Movement

In a year’s time, shares of L3 Technologies have gained 27.2% compared with the industry’s 13.6% rally.

Zacks Rank & Other Stocks to Consider

L3 Technologies currently carries a Zacks Rank #2 (Buy). A few other top-ranked companies in the same sector are Leidos Holdings (NYSE:LDOS) and Northrop Grumman (NYSE:NOC) , each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Leidos Holdings delivered average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 1.1% up to $4.58 over the past 60 days.

Northrop delivered average positive earnings surprise of 18.50% in the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 1.8% to $19.29 over the past 90 days.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>