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L3 Technologies Wins Deal to Supply Spares for Triton UAS

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L3 Technologies, Inc. LLL recently secured a contract to supply spare parts for Triton unmanned aircraft system (“UAS”). Work related to the deal is scheduled to be over by Jun 28, 2021.

Valued at $11.4 million, the contract was awarded by the Defense Logistics Agency Aviation, Philadelphia, PA. The company will utilize fiscal 2017-2018 Navy aircraft procurement funds to execute the task in Utah.

A Brief Note on Triton

MQ-4C Triton is a new broad-area maritime-surveillance (“BAMS”) UAS manufactured by Northrop Grumman NOC for the U.S. Navy. It is a high-altitude, long-endurance UAS that provides real-time intelligence, surveillance and reconnaissance (“ISR”) across vast oceans and coastal regions.

MQ-4C can fly 24 hours per day and seven days a week, with 80% effective time on station (“ETOS”).

Our View

Unmanned aerial vehicles are relatively easy to maintain and their average price comes at a fraction of the cost of manned aircraft. Moreover, since these are unmanned, if detected in hostile airspace, loss of life is zero. Thus, with increasing geo-political tensions across the world, surveillance through unmanned aircraft vehicles is in vogue lately for ensuring better security of a nation at minimal possibility of casualty.

In this context, it is imperative to mention that Northrop’s Triton UAS is recently experiencing increased traction in the unmanned aircraft space. In June 2018, the Australian government agreed to purchase six Triton aircraft for a total value of $1.4 billion.

Currently, L3 Technologies’ Security & Detection Systems (“SDS”) unit provides OEM-specified spare parts and consumables, which are designed to maintain the superior detection capabilities of various military equipment. Incorporation of  such spares into Triton is expected to make these UAS even more useful for the U.S. Navy, resulting increased demand for these jets.

As the Navy plans to procure 68 such jets for the Unites States, we expect more deals like the latest one for L3 Technologies, thereby boosting its profit margin.

Price Movement

In a year’s time, shares of L3 Technologies have increased 13.4% compared with the industry’s 25.9% rally. The underperformance can be attributed to weak performance in some of its product lines.

Zacks Rank & Key Picks

L3 Technologies currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are Aerojet Rocketdyne Holdings AJRD and Engility Holdings EGL.

While Aerojet Rocketdyne Holdings sports a Zacks Rank #1 (Strong Buy), Engility Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet Rocketdyne came up with an average positive earnings surprise of 9.27% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings moved north 30.9% to $1.27 over the last 90 days.

Engility Holdings delivered an average positive earnings surprise of 19% in the preceding four quarters. The Zacks Consensus Estimate for 2018 earnings moved up 16.8% to $2.02 over the last 90 days.

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