LHX to Sell Majority Stake in Space Propulsion Business for $845M

L3Harris Technologies, Inc. LHX recently stated that it has agreed to sell a majority stake of its Space Propulsion and Power Systems business to AE Industrial Partners at a total enterprise value of $845 million. 

The RS-25 rocket engine business has been excluded from the transaction. L3Harris will retain a 40% ownership interest in the newly formed space technology business alongside AE Industrial. The transaction is expected to close in the second half of 2026, subject to regulatory approvals and other customary closing conditions.

LHX Unlocks Value Through Space Business Divestment

The transaction provides L3Harris with significant strategic and financial advantages. By divesting a controlling interest in its Space Propulsion and Power Systems business, the company realizes substantial value from a non-core asset while enhancing balance sheet strength and financial flexibility. The deal lowers exposure to capital-intensive space programs.

With the remaining stake, LHX ensures continued participation in future growth without the need for additional capital commitments. The exclusion of the RS-25 rocket engine business preserves L3Harris’ position in critical national security programs. Overall, the deal tightens portfolio focus, improves risk-adjusted returns and reinforces long-term shareholder value.

Strategic Divestments Reshape Aerospace-Defense Portfolios

The aerospace and defense sector is seeing a rise in divestments as companies sharpen focus on cost efficiency, portfolio optimization and capital discipline amid intensifying competition. These moves help companies exit non-core businesses, reduce operational risk and free up capital for priority programs. By streamlining operations and reallocating resources, companies can strengthen financial flexibility, improve returns and reinforce long-term competitive positioning.

Along with LHX, other aerospace-defense companies have indulged in divestment deals, as discussed below:

Northrop Grumman Corp. NOC: The company sold its mission training and satellite ground network communications software business to Serco for about???$327???million in cash, completing the divestiture in 2025 after regulatory approvals. By exiting this non core services business, Northrop can reallocate resources toward its core defense systems and technology programs, sharpen its strategic focus and potentially strengthen overall financial performance.

NOC has a long-term (three to five years) earnings growth rate of 4.19%. The Zacks Consensus Estimate for 2026 sales is pegged at $44.05 billion, which implies a rise of 5.2%.

The Boeing Company BA: In 2025, the company completed the sale of portions of its Digital Aviation Solutions business, including Jeppesen, ForeFlight, AerData and OzRunways, to Thoma Bravo in an all cash deal valued at $10.55???billion. The transaction will strengthen Boeing’s balance sheet, improve its capital structure and support its goal of focusing on core aerospace and defense operations.

BA has a long-term earnings growth rate of 31.33%. The Zacks Consensus Estimate for 2026 sales stands at $94.72 billion, which calls for a rise of 8.6%.

LHX Stock Price Movement

In the past six months, shares of L3Harris have risen 21.4% compared with the industry’s growth of 10.1%.

LHX’s Zacks Rank & A Key Pick

LHX currently carries a Zacks Rank #3 (Hold). A better-ranked stock from the same industry is Draganfly Inc. DPRO, which has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for DPRO’s 2026 sales is pegged at $12.63 million, which implies a rise of 34.9%. The Zacks Consensus Estimate for 2026 earnings per share is pegged at a loss of 47 cents, which suggests an increase of 57.8%.

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This article originally published on Zacks Investment Research (zacks.com).

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