On September 14, L3Harris Technologies, Inc. (NYSE:LHX) said it had secured a $60 million contract from the U.S. Air Force to continue producing sensors that let aircrews choose the precise detonation altitude.
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The DSU-43/B Cockpit Selectable Height of Burst Sensors (C-HOBS) allow crews to adjust the munition’s effect to different targets and mission environments. The system will provide enhanced radar-guided performance, advanced sensing features, and manual and cockpit-selectable burst heights, the company said in a press release.
The production will take place at L3Harris’ Cincinnati facility. The order comes at a time when the defense contractor is expanding the output capacity of proximity fuzes and sensors for the U.S. military to support a wartime footing.
Bull Case
Investors should view the C-HOBS contract as evidence of the company’s recurring business with the Air Force on precision-guidance electronics. Despite being small in magnitude, such low-risk and steady order flow underpins the bull thesis for the stock.
That flow sits alongside a larger story. The award falls under LHX’s Missile Solutions division, which is a key growth driver for the contractor. The segment’s Q2 revenue increased 14% year-over-year to $1.05 billion. Moreover, the company is negotiating over $20 billion in new contracts for the division.
Even smaller contracts such as this one add up and keep the company’s fusing and sensor production lines busy. They also help in raising L3Harris’ overall backlog, which reached a record $42 billion at the end of the second quarter.
The C-HOBS contract is a reaffirmation of demand strength in the segment that is fueling the defense contractor’s growth story.
Bear Case
Skeptics would argue that a $60 million contract to continue production of sensors does little to alter L3Harris Technologies, Inc.’s investment thesis, and that describing it as a favorable catalyst would be an exaggeration.
The stock has struggled in 2026, and an important factor behind the pullback has been the delayed IPO of the Missiles Solutions division (pushed to mid-2027), which C-HOBS belongs to, as the management felt market conditions did not reflect the true value of the business.
Shares have fallen 19% since the announcement during the Q2 earnings call on July 29, taking the year-to-date slump to nearly 15% as of the close on September 17. Considering these factors, bears believe that incremental sensor contracts such as this are unlikely to lift the sentiment on their own.
Moreover, the stock’s valuation is slightly stretched. It trades at a forward price-to-earnings ratio of 20.70, which is above the sector median of 19.17 and its own five-year average of 19.60.
Hedge Fund Sentiment
According to Insider Monkey, hedge fund ownership in L3Harris Technologies, Inc. dropped 5% sequentially during the second quarter to 56 funds from 59 funds at the end of Q1.
D E Shaw is the largest stakeholder in the company, with shares worth more than $306 million, as of June 30, 2026. This is a significant jump from just $6.8 million on March 31.
This is followed by AQR Capital Management in second with a holding of $246 million. The fund increased its stake by 194% in Q2. Arrowstreet Capital took the third spot with a stake of $211 million, up 11% from the previous quarter.
Closing Take
Steady contracts like the C-HOBS reinforce strong demand that adds to the company’s record backlog. However, the stock’s slightly elevated valuation and uncertainty surrounding the missile business IPO cloud near-term sentiment. Despite a promising long-term potential, investors should hold off on adding new money until there are clearer signals on the spinoff.
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