L3Harris Wins $876 Million Next Generation Jamming Contract

In the latest in a string of lucrative federal government contract awards, L3Harris Technologies (NYSE:LHX) has secured new work for the Navy. As part of an ongoing project involving the company's aerial combat countermeasure solutions, it has accepted additional deliverables worth a cool $876 million.

This isn't the first jumbo-sized contract extension the company's been a part of, and it probably won't be the last. Regardless, it's considerable, and the project is important. Let's dive into the deal and determine how this will affect L3Harris's financials and its status as a go-to defense contractor in its niche.

Image source: Getty Images.

Jamming hard

L3Harris announced that it received an undefinitized contract modification award from the Navy to build prototype hardware, assemble specialized manufacturing equipment, and support flight testing in the Next Generation Jammer Low Band (NGJ-LB) program. For those unfamiliar with government contract-speak, this means the company has agreed to start the specified work without finalized terms on particulars such as the final price, delivery schedules, and other key items.

This is significant because the Feds typically offer such awards in situations of urgent operational need, where they need a project completed quickly (and can't spend time/resources hammering out terms with contractors). This bodes well for a company under contract, as revenue from such an arrangement can arrive relatively quickly in the usually slow-burn world of defense contracting. And since the U.S. federal government is a reliable customer with a huge budget, it's highly likely to finalize the contract under terms and prices that make participation more than worth the effort.

Sure enough, NGJ-LB is now operating on an accelerated timeline. I think it's safe to assume that the ongoing conflict with Iran, which has involved Navy aviation, is heightening the urgency to complete it.

The program is aimed at replacing aging equipment designed to disrupt and degrade low-frequency radar and communications used by our enemies against U.S. combat aircraft. As it's a specialist in the communications and networking segments of the defense industry, L3Harris is a highly appropriate choice for this work. What's also surely appealing to the Navy is the modular, open-system architecture of its hardware, which should make maintenance and replacement relatively simple.

In the press release touting the new award, L3Harris quoted its president of communications and spectrum dominance, Chris Aebli, as saying, "This program enhances the ability to counter adversaries operating in lower-frequency bands."

He added that the company is "moving fast to deliver a system that equips aviators to counter those threats from safer, extended distances."

Large in scale

This isn't likely to sway L3Harris bears into buying the company's stock, because even that high sticker price (subject to modification, of course) is a drop in the bucket. It has quickly risen to become a top U.S. defense contractor; this, combined with its considerable space business, has made it massive, with nearly $22 billion in annual revenue last year.

So no, this isn't a game-changing project for the very experienced and awfully busy company. But it's an indisputable sign that it's known and trusted enough by our government to do mission-critical work that can pay very handsomely in a relatively constricted period of time. Those levels of trust and reliability are never easily or quickly won, and only a handful of major contractors ever earn that status. This alone, at a time of conflict and strife in numerous corners of the world, makes L3Harris stock well worth considering for any stock portfolio.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends L3Harris Technologies. The Motley Fool has a disclosure policy.