:max_bytes(150000):strip_icc()/GettyImages-2237415584-01723bec11b54bfcaf98c84aac98ef8d.jpg "A Deal With the Pentagon and Planned Spin-Off Has This Defense Stock at Record Highs")
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Key Takeaways
- L3Harris shares climbed to a record high Tuesday after the company announced an investment in its missile solutions segment from the federal government.
- With that investment, L3Harris announced plans to spin off the division to its own public company in the second half of this year.
L3Harris (LHX) shares are rising to fresh highs Tuesday, thanks to a show of support from the U.S. government.
The shares were up about 3% at $350 Tuesday morning, leaving the shares on track to top Monday’s record close after the defense contractor said it plans to spin off one of its divisions with backing from the federal government.
The U.S. government will invest $1 billion in L3Harris’ missile solutions business that will convert to equity once it has debuted on the public market in the second half of this year, the company said. L3Harris will retain a controlling stake in the business.
Why This Matters to Investors
L3Harris derives the bulk of its revenue from the U.S. government, and investors are likely to see its show of support for the company’s missile solutions division as a promising signal for the business.
L3Harris said it has “significantly invested to transform and grow” the production capacity of the division since acquiring Aerojet Rocketdyne, and that the government’s support will allow it to expand further. The missile solutions segment includes the production of solid rocket boosters that power weapons like the Tomahawk missile program.
With Tuesday’s gains, shares of L3Harris have surged close to 20% in January so far. Other defense stocks have also rallied recently as President Trump called for higher spending on defense.
