2024 Begins the Next Phase in L3Harris' Emergence as a Prime Defense Contractor

L3Harris Technologies is the sixth-largest U.S. defense contractor by sales (13th globally, according to the Stockholm International Peace Research Institute). It formed in 2019 from the merger of L-3 Technologies, a sensormaker that operated a decentralized business focused on inorganic growth, and the Harris Corporation, a sensor and radio manufacturer that ran a more unified business. Underpinning the merger was an assumption that additional scale would primarily generate cost synergies and eventually, the firms could produce meaningful revenue synergies. With the recent addition of ViaSat's tactical data link business and most recently the $4.7 billion acquisition of Aerojet Rocketdyne, L3Harris has opportunistically vaulted its strategy forward into becoming a more well-rounded defense prime contractor, adding munitions, space exploration, and hypersonic missile components and capabilities to its very radio- and communications-heavy base. That said, Aerojet supplies components to many other defense contractors, which isn't likely to change, and competes with the space segment of Northrop Grumman. We think it will take time for meaningful revenue synergies that weren't already in the backlog for L3Harris, ViaSat, or Aerojet to materialize.