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L3Harris Technologies (LHX) Wins Deal to Aid C-130H Program

Published 01/16/2022, 08:29 PM
Updated 07/09/2023, 06:31 AM

L3Harris Technologies (NYSE:LHX) Inc. LHX recently secured a contract to offer program depot maintenance (PDM) for C-130H aircraft. The award has been provided by the Air Force Life Cycle Management Center, Robins Air Force Base, Warner Robins, GA.

Details of the Deal

Valued at $24 million, the contract is expected to get completed by Jan 31, 2027. Per the terms of the deal, L3Harris will offer services required to complete C-130H PDM actions, perform required aircraft modifications and all transactional sustainment actions associated with the C-130 Foreign Military Sales Directorate.

Work related to this deal will be performed in Waco, TX.

A Brief Note on C-130 Program

C-130 Hercules is a legacy combat aircraft program. It has the longest, continuous military aircraft production run in history and is one of the top three longest, continuous aircraft production lines of any type.

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

What Favors L3Harris?

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 L3Harris’ Integrated Mission Systems segment offers periodic depot maintenance for airborne missions.

As the United States is spending heavily on 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 L3Harris Technologies are enjoying a steady flow of modernization and upgrade-related deals from the Pentagon like the latest contract. These, in turn, tend to boost the company’s profit margin.

Growth Prospects

Per a Research and Markets report, the global combat aircraft market is expected to witness a CAGR of 4% during the 2020-2025 time period. Such growth can be attributed to a rise in global threats and geopolitical instabilities, and increased spending on defense. These projections should benefit L3Harris and other defense players like Northrop Grumman NOC, Boeing BA and Textron TXT, which have a strong presence in the combat aircraft market.

Since its inception, Northrop Grumman has been a pioneer in the development of manned aircraft for combat. Northrop Grumman also has a tradition of providing technological leadership in all aspects of military aviation and aircraft, such as manned, unmanned, targeting, surveillance, and aircraft self-protection systems that enable warfighters to accomplish missions anytime, anywhere and under any conditions.

Northrop Grumman reported third-quarter 2021 earnings of $6.63 per share, which surpassed the Zacks Consensus Estimate of $5.93 by 11.8%. NOC stock has gained 34.2% in the past year.

Boeing’s Defense, Space & Security segment’s primary products include fixed-wing military aircraft, F/A-18E/F Super Hornet, F-15 programs, P-8 programs, KC-46A Tanker, and T-7A Red Hawk. This segment also produces rotorcraft and rotary-wing programs, such as CH-47 Chinook, AH-64 Apache, and V-22 Osprey.

Boeing incurred an adjusted loss of 60 cents per share in third-quarter 2021, which came in much wider than the Zacks Consensus Estimate of a loss of 17 cents. BA stock has risen 10.6% in the past year.

Textron’s business unit, Textron Aviation Defense designs, builds and supports versatile and globally known military aircraft preferred for training and attack missions. Some of Textron’s renowned products include Beechcraft T-6C trainer and AT-6 Wolverine.

Textron reported third-quarter 2021 adjusted earnings of 85 cents per share, which exceeded the Zacks Consensus Estimate of 75 cents by 13.3%. TXT stock has gained 56.7% in the past year.

Price Movement and Zacks Rank

Shares of L3Harris have gained 20.9% in the past year against the industry's decline of 26.7%.

Zacks Investment ResearchImage Source: Zacks Investment Research

The company currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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