L-3 Communications Holdings Inc.
) won a task order from the GSA Federal Systems Integration and
Management Center. The contract is worth $357 million and will
run through 2018.
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Specifically, the federal government has awarded the task order
under the GSA Alliant vehicle to the company's National Security
Solutions ("NSS") segment in support of the Reserve Component
Automation ("RCA") program. The deal calls for L-3 to perform
software development, systems integration, distance learning and
IT technical support services.
This RCA program is a mission-critical curriculum to update and
maintain the automated information system for support of the Army
Reserve and National Guard soldiers. The modernization and
upgrade program will help maintain continuity in Army Reserve and
National Guard daily operations.
L-3 Communications is a leading supplier of a broad range of
products and services used in a number of aerospace and defense
platforms. The company's earnings as well as revenue during the
second quarter easily surpassed the Zacks Consensus Estimate on
the back of strong sales and international orders. With its
varied businesses, L-3 Communications has managed to maintain a
stable earnings flow.
The company's NSS unit provides a full range of cyber security,
intelligence, enterprise IT and security solutions services to
the DoD, DoS, U.S. government intelligence agencies and global
However, with U.S. contract values gradually dwindling in the
wake of defense budget uncertainties, strong orders from
international customers have been a saving grace. Again, its NSS
division's net sales declined 1.3% from the year-ago level during
the second quarter. The downtrend reflects lower demand for a
technical support contract from a U.S. government agency due to
sequestration funding reductions and less demand for U.S. Special
Operations Command IT support services. These declines were
partially offset by increased demand for intelligence and IT
support services for the U.S. government and U.S. government
agencies on existing contracts.
Hence, austerity in defense budget will likely continue to act as
a deterrent to L-3 Communications' broad growth objectives. The
company presently carries a Zacks Rank #3 (Hold).
Other stocks in the defense domain currently performing well are
Northrop Grumman Corp.
Lockheed Martin Corp.
), all with a Zacks Rank #2 (Buy).