L-3 Communications Holdings Inc.
) reported its fourth quarter 2012 earnings per share of $2.25,
surpassing the Zacks Consensus Estimate of $2.12 by 6.1%. The
results were 11.4% lower than the year-ago earnings of $2.54 per
2012 operating earnings were $8.01 per share, up 1.5% from the
Zacks Consensus Estimate of $7.89 per share. However, the annual
performance was 9.5% lower than the year-ago figure of $8.85 per
Quarterly net sales were up 0.5% year over year to $3.56 billion
and surpassed the Zacks Consensus Estimate by $92 million.
The company generated total revenue of $13.14 billion in 2012,
0.1% lower than $13.15 billion reported in 2011. The results were
$93 million higher than the Zacks Consensus estimate of $13.05
During the year the company witnessed higher sales from its
Command, Control, Communications, Intelligence, Surveillance and
Reconnaissance (C3ISR), Electronic Systems and Aircraft
Modernization and Maintenance (AM&M) segments, offset by
lower sales from the National Security Solutions (NSS) segment.
It appears that the company is doing well in its international
and commercial businesses. However, uncertainty in the U.S.
defense budget continues to be an overhang on future prospects.
: Electronic Systems generated net sales of approximately $1.61
billion in the reported quarter, up 4% year over year. For 2012,
sales were up 1% to $5.67 billion.
This segment benefited from higher contribution from inorganic
sources and increase in delivery of mobile and ground-based
satellite communication systems, partially offset by reduced
shipments of tactical quiet generators for the U.S. and reduced
U.S. Army requirements for night vision and illumination
: The segment recorded net sales of $967.1 million, down 5% year
over year. For 2012, sales were up 3% to $3.60 billion.
Higher demand for airborne ISR systems for U.S. government and
foreign military customers was offset by lower deliveries of
remote video terminals to the U.S. Army.
: Net sales at the AM&M segment were up 2% year over year to
$628.8 million. For 2012, sales were also up 2% to $2.48 billion.
This segment gained from international orders, international
head-of-state aircraft modification contracts, and improved scope
on the EC-130 aircraft for the U.S. Air Force (USAF). This was
partially offset by decline in logistics support services due
primarily to the competitive loss of a task order for U.S. Army
contract field team support services in Southwest Asia.
: The NSS unit generated net sales of $347.5 million, down 4%
year over year. For 2012, sales were down 14% year over year to
The downtrend reflects waning demand for U.S. Special Operations
Command information technology (IT) support services, decline in
IT support services for select non-DoD U.S. government agencies,
competitive contract losses, and lower sales from intelligence
support services due to the drawdown of U.S. military forces in
Total operating income for the fourth quarter increased $10
million year over year to $364 million. Operating margin expanded
20 basis points to 10.2%. However, for the full year operating
income decreased 3.4% year over year to $1.35 billion.
Interest expenses for 2012 were $184 million reflecting a decline
of 9.8% from the year-ago level. This was mainly due to a lower
debt level and lower interest rates on outstanding debts.
The company is working hard on lowering its operating cost. The
initiatives taken by the company boosted the operating margins of
its NSS segment by 20 basis point in 2012.
Cash and cash equivalents as of Dec 31, 2012 were $349 million
versus $764 million as of Dec 31, 2012. The decline was primarily
due to cash used for M&A purposes during the year.
Long-term debt as of Dec 31, 2012 were $3.62 billion versus $4.12
billion as of Dec 31, 2011.
Capital expenditures, net of dispositions of property, plant and
equipment, were $205 million for 2012 , compared with $181
million in 2011.
During the year the company returned nearly $1.1 billion to its
shareholders, through share buybacks and payment of dividend,
moderately lower than the 2011 level of $1.14 billion.
The company increased its earnings guidance for 2013 to a range
of $8.15-$8.35 from the earlier range of $7.95-$8.15. The company
maintained its revenue guidance in the range of $12.55-$12.75
billion. Operating margin expectation for 2013 remained unchanged
Other Defense Company Releases
Northrop Grumman Corporation
) delivered operating earnings of $2.06 per share in
fourth-quarter 2012, breezing past the Zacks Consensus Estimate
The Boeing Company
) clocked operating earnings of $1.46 per share, ahead of the
Zacks Consensus Estimate of $1.19. However,
Lockheed Martin Corporation
) fourth quarter operating earnings of $1.73 per share fell short
of the Zacks Consensus Estimate of $1.79.
L-3 Communications succeeded in beating the Zacks Consensus
Estimates. Going forward, we expect the company to continue to
post strong earnings based on its opportunities in Electronic
Systems and C3ISR.
The company's balanced business mix, improving operational
efficiencies and focus on research and development allow it to
pursue strategic opportunities in the commercial arena as well as
overseas. Besides, the increase in the year-end funded backlog of
the company by nearly 10% indicates that the company is on the
Based in New York, L-3 Communication is a leading supplier of
secure communications, simulation, training systems, avionics,
ocean and telemetry products, space and wireless products, and
microwave components, which are used in a number of aerospace and
defense platforms. With a market cap of $7.33 billion, the
company employs 61,000 employees. L-3 Communications presently
retain a Zacks Rank #3 (Hold)
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