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This Month’s Exclusive Story

L3Harris Blasts Off With a $1 Billion Pentagon Payload

Submitted by Jeffrey Neal Johnson. First Published: 1/15/2026. 

Quick Look

• The government is directly funding the expansion of solid rocket motor production to fix critical supply chain shortages across the entire defense sector.
• Management plans to unlock shareholder value by spinning off the missile propulsion business into a standalone public company later this year.
• L3Harris cements its position as a vital merchant supplier by selling essential technology to major prime contractors rather than competing for whole platforms.

Wall Street often reacts to defense contracts, but today the market is responding to something bigger: a fundamental restructuring of how the government supports the defense industry. Shares of L3Harris Technologies (NYSE: LHX)climbed in the third week of January 2026, trading near record highs in the $350–$360 range. This move follows a historic announcement that the Department of Defense (DoD) is investing $1 billion directly in the company to expand its manufacturing capacity.

This is not a routine purchase order for radios or sensors; it is a strategic government intervention to secure the means of production. For investors, the DoD’s involvement signals a major shift in the defense sector. The Pentagon is effectively partnering with L3Harris to address critical supply-chain bottlenecks, validating the company’s strategy and materially de-risking its growth outlook.

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A surge in trading volume suggests L3Harris’ institutional investors see this as a turning point. It is rare for the government to provide direct capital for factory expansion; this effectively subsidizes the company’s capital expenditures (CapEx), letting L3Harris grow without draining its own cash. For a stock already up more than 60% over the past year, that catalyst could fuel the next leg of the rally.

The Split-and-Spin: Unpacking the Deal Mechanics

To understand why the stock is moving, investors need to look under the hood of this complex transaction. L3Harris is pursuing a split-and-spin strategy to create leaner, more focused businesses. Management announced it will spin off its Missile Solutions unit — the division responsible for producing solid rocket motors — into a standalone public company later in 2026.

This is a classic value-unlock play: conglomerates often trade at a discount because their diverse businesses are difficult to value collectively. Separating the parts allows the market to price each business more accurately.

• The Spin-Off (Missile Solutions): The new Missile Solutions company will focus exclusively on defense propulsion. The DoD’s $1 billion investment is directed to this business. Current L3Harris shareholders will likely receive shares in the spun-off company, meaning they would own stock in two distinct entities: the original L3Harris (electronics and systems) and the new Missile Solutions company (propulsion manufacturing).
• The Divestiture (Space Propulsion):Separately, L3Harris is selling its commercial Space Propulsion business to private equity firm AE Industrial Partners for $845 million. That commercial unit, which builds engines for space travel, will be rebranded under new ownership.

The distinction matters. L3Harris is monetizing its commercial space assets for immediate cash while retaining the defense missile assets to spin off to shareholders. This two-pronged approach strengthens L3Harris’ balance sheet and creates a pure-play defense company that the Pentagon is prepared to support.

The Power of Being a Supplier: Selling the Shovels

L3Harris operates differently from prime contractors such as Lockheed Martin (NYSE: LMT) or Boeing (NYSE: BA). It positions itself as a merchant supplier: while other firms build the jets and ships, L3Harris supplies the radios, sensors, and engines that make those platforms work.

That supplier role explains why the Pentagon stepped in. The U.S. military faces a critical shortage of solid rocket motors (SRMs). You cannot fire a Javelin anti-tank weapon or a PAC-3 missile interceptor without these motors. For years the industry relied on too few suppliers, creating a dangerous bottleneck. When engine supply dries up, production lines for major weapons systems stall.

By providing $1 billion, the government is ensuring L3Harris (and its future spin-off) has the capital to scale engine production. For the stock, this builds a distinct competitive moat. L3Harris doesn’t need to win every missile-system contract to profit; it only needs the industry to keep building missiles. As long as global demand for munitions remains elevated, L3Harris serves as a utility provider for the sector.

The Ripple Effect: Why General Dynamics Is Watching

The benefits extend beyond L3Harris. Major defense firms like General Dynamics (NYSE: GD)are likely viewing the news with relief. General Dynamics builds large tactical missile systems but relies on suppliers such as L3Harris for the rocket motors that power them.

When suppliers are slow, companies like General Dynamics cannot deliver finished systems, which delays revenue and frustrates military customers. The DoD’s investment functions as a subsidy for the entire supply chain. By addressing the bottleneck at its source, the government helps OEMs speed up their production lines.

That creates a rising-tide scenario for the defense industry. As the new Missile Solutions company ramps up production with government backing, General Dynamics and other primes can fulfill backlogs more quickly. Still, L3Harris is the primary beneficiary because it controls a critical choke point in the technology and supply chain.

The Arsenal of Resilience: A New Era for Defense Investors

Today’s announcement is a rare example of the government stepping in to structurally change a public company. By backing the Missile Solutions spin-off with $1 billion, the Pentagon has effectively chosen a partner in the effort to rearm and modernize U.S. munitions production.

L3Harris is transforming from a broad conglomerate into two focused companies. The execution risks of a corporate split are real — spinning off a business is complex — but the government’s substantial financial support provides a level of security rarely seen in the equity market. As the company moves toward the official split later in 2026, L3Harris stands out as a play on industrial resilience and modernization. For this company, the sky may no longer be the limit; it is the launchpad.

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