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L3Harris (LHX) Secures Contract to Aid AN/ALQ-214 System

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L3Harris Technologies, Inc. (LHX - Free Report) recently clinched a contract involving its AN/ALQ-214 radio frequency (RF) integrated countermeasure system. The award has been provided by the Naval Air Systems Command, Patuxent River, MD.

Valued at $29.5 million, the contract is projected to be completed by November 2026. Per the terms of the deal, L3 Harris will be engaged in the production, testing, delivery and installation of three automated test equipment and associated hardware to complete AN/ALQ-214 weapon replacement assembly (WRA) repairs.

This contract also authorizes L3 Harris to offer program management, integrated logistics support and other services in support of completing the stand-up and integrated defensive electronic countermeasures AN/ALQ-214 organic repair depot for WRA level repairs for the Navy. The work related to this deal will be carried out in Clifton, NJ.

Significance of AN/ALQ-214

The AN/ALQ-214 features autonomous operations within hostile environments to protect aircrew and aircraft against advanced RF threats.

The system is designed to counter RF-guided threats with proven electronic countermeasures (ECM) techniques that deny, disrupt, delay and degrade launch and engagement sequences. Each threat is identified, prioritized, countered and displayed to the aircrew for situational awareness and self-protection. The AN/ALQ-214 IDECM utilizes a modular and reprogrammable system to provide theatre-specific configurations.

Such remarkable features must have been resulting in a strong inflow of orders for the system for LHX, thus boosting its revenue generation prospects. The latest contract win is a bright example of that.

Growth Prospects

Nations globally have been reinforcing their defense capabilities to strengthen their warfare capabilities. This has resulted in increased spending on electric warfare capabilities that play an integral part in any mission success.

Per a report from Mordor Intelligence, the global electronic warfare market is projected to witness a CAGR of more than 4% during the 2022-2027 period. Such growth prospects should benefit L3 Harris and other defense players in the industry like Lockheed Martin (LMT - Free Report) , Northrop Grumman (NOC - Free Report) and General Dynamics (GD - Free Report) that have exposure in this market.

Lockheed Martin’s Advanced Off-Board Electronic Warfare (“AOEW”) program delivers persistent electronic surveillance and attack capability against naval threats like anti-ship missiles (ASM). Its AOEW Active Mission Payload AN/ALQ-248 system is a self-contained electronic warfare pod hosted by the MH-60R or MH-60S Seahawk helicopter, which provides advanced ASM detection and response capabilities to the Navy.

LMT’s long-term earnings growth rate is pegged at 6.5%. LMT shares have returned 3.7% value to investors in the past year.

Northrop’s Surface Electronic Warfare Improvement Program (“SEWIP”) Block 3 is an upgrade to the legacy AN/SLQ-32 system and provides game-changing capability for non-kinetic electronic attack options to the U.S. fleet. It protects surface ships from anti-ship missiles, providing early detection, signal analysis and threat-warning capabilities. Some of its other electronic warfare systems are the AN/APG-83 Scalable Agile Beam Radar, the ALQ-251 radio frequency countermeasures system and the AN/APR-39 Radar Warning Receiver/Electronic Warfare Management System.

NOC’s long-term earnings growth rate is pegged at 4.1%. The Zacks Consensus Estimate for Northrop’s 2023 sales indicates an improvement of 5.5% from the previous year.

For many years, General Dynamics has been performing as the Lead Systems Integrator for SEWIP Block 1. SEWIP, a spiral-block development program, provides an immediate improvement for the legacy surface ship electronic warfare detection and countermeasure system — the AN/SLQ-32.

GD boasts a long-term earnings growth rate of 8.9%. The Zacks Consensus Estimate for General Dynamics’ 2023 sales calls for an improvement of 7.3% from the previous year.

Price Movement

In the past year, shares of L3 Harris have decreased 21.7% compared with the industry’s 7.8% decline.

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Zacks Rank

L3 Harris currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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