The merging of L3 Technologies and Harris Corp. 'was a brilliant combination that's created the most high-tech operator in the industry,' Jim Cramer says.
"They think the company can beat Wall Street's consensus earnings estimates in short order, and they believe L3Harris is poised to take market share in the Pentagon budget thanks to their technology-rich product offerings," Cramer said. "They're in some of the strongest parts of the defense sector, both companies had strong numbers the last time they reported, and management has a tremendous track record.
Buying the stock here at about $180 is a bet on management's ability to mitigate costs, Cramer said. CEO Bill Brown, who led Harris Corp., says the combined company is "an efficient solutions provider, and 40% of our total savings are going back to the customer in the form of cost-plus contracts that drive more affordability." In two years, he will retire and be succeeded by COO Chris Kubasik, who was chief of L3 Technologies.
L3Harris is laboring to integrate the companies by optimizing the supply chains and reducing overhead expenses, Cramer said. The company is also offering shareholders a 10% dividend boost and initiating a $4 billion stock buyback. "Man, $4 billion — that is substantial. This is only a $44 billion company ... that means they're planning to retire roughly 9% of the share count, including more than 5% over the next year," he said.
L3Harris' stock has rose nearly $20 since it closed in early July and trades at 18-times next year's earnings estimates. That's more expensive than its peers like
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