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KJP

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https://www.wsj.com/world/europe/wars-push-up-demand-for-weapons-sparking-fears-of-shortages-57d664ad?mod=hp_lista_pos1

 

With demand increasing faster than production, prices of some supplies have soared. NATO-standard 155-millimeter artillery shells, one of the West’s most basic armaments, had cost governments about $2,100 apiece before Russia’s invasion of Ukraine last year, said Dutch Admiral Rob Bauer, Stoltenberg’s top military adviser, at the NATO forum. The price of those shells, which Bauer dubbed “one of the most coveted objects in the world right now,” has increased fourfold, to about $8,400, he said.

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General Dynamics said it has been able to boost production of artillery shells and other munitions faster than expected, boosted by Pentagon investment in new facilities. The company is targeting annual production of one million shells, a fivefold increase. Sales at its combat unit, which employs more than 2,000 staff in Europe, had been expected to be flat at best this year. They are up 15% so far this year, stoked by orders for shells, as well as for armored vehicles and military bridges. “Frankly, we don’t see that demand signal slowing down,” Aiken said.    

 

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Checkup on LHX. Looks like they stop deals for a while which should not surprise anyone.

https://seekingalpha.com/news/4045760-l3harris-to-halt-ma-activity-for-foreseeable-future

 

I looked at the latest shareholder presentation and quite frankly wasn’t too impressed. very modest margin improvement projected from a bit less than 15% to 16% in 2026. The 2026 FCF target of $2.8N translates into $14.7 in FCF/ share which I think is a bit less than what forecasts are projecting. And all that with quite a bit of leverage also the sale of the commercial pilot training business will reduce this somewhat.

 

The rest of the shareholder presentation was just platitudes (digital factory, cost saving  blah blah blah )

https://www.l3harris.com/sites/default/files/2023-12/LHX_InvestorDay_ExecutivePresentations_Final.pdf

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Was never a L3 fan. Not because of any great insight on my part.
 

Just that it never seemed to have a core franchise like others. So it always seemed like a distant sixth behind the A&D majors. With all the wars and defense concerns that are happening, these guys don’t seem to be able to leverage their tilt toward short-cycle heavy side of the business.
 

In contrast to the long-cycle business tilted five majors.  
 

Interestingly, L3 was a minor subsidiary of Lockheed at some point in the 90s from which it was carved out. And one of the “L” in L3 stands for “Lehman Brothers”.


Say WHAT ?!?

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Harris was a great business (satellites ) while L3 was an acquisitive rollup with somewhat subpar margins. I m thinking that similar to the Boeing/Mc DonnelDouglas merger, the junior partner won with LHX and now the business looks more like L3 rather than Harris. CEO Kubacik is from L3 as well and continued the acquisitions after the L3 merger. I particularly see Aerojet Rocketdyne as a questionable fit, since they now compete with customers. I guess AJRD was acquired because they could buy it (LMT or NOC were not allowed to) not because it was a good fit.

 

In any pandemic, case, to me, the IR day presentation does not look all that convincing. I do like that Shaw is not keeping management on a shorter leash.

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