L3Harris Has Refined Its Portfolio to Pursue Opportunities in Space, Missiles, Drones, and Radios

L3Harris Technologies is the sixth-largest US defense contractor by sales. It was formed in 2019 from the merger of L3 Technologies, a decentralized and acquisitive maker of sensors, and Harris, 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. The addition of Viasat's tactical data link business and the $4.7 billion acquisition of Aerojet Rocketdyne reflected L3Harris' strategy of becoming a more well-rounded defense prime contractor. These additions brought 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 still think it will take time for meaningful revenue synergies that weren't already in the backlog for L3Harris, Viasat, or Aerojet to materialize.