L-3 Communications Holdings Inc.
) announced that its L-3 GCS unit was awarded a contract by the
U.S. Special Operations Command or USSOCOM to develop and
manufacture Very Small Aperture Terminal or VSAT satellite systems.
The total contract value is up to $500 million spread over the next
5 years. The program, called as Special Operations Forces
Deployable Node-Family of Terminals, would provide tactically
deployed Special Operations Forces or SOF users with worldwide
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Located in Victor, New York, L-3 GCS is a leading provider of
satellite communications (SATCOM) systems that integrate data,
broadband Internet, telephony, multimedia, audio, video and
computer networking. These rugged, easily deployed systems are
utilized by the U.S. Department of Defense and Department of
Homeland Security, as well as federal agencies and commercial
L-3 Communications Holdings operates through its wholly owned
subsidiary, L-3 Communications Corporation. L-3 Communications is a
leading supplier of a broad range of products and services used on
a number of aerospace and defense platforms. In addition, the
company is a prime system contractor for aircraft modernization and
maintenance; ISR collection platforms; simulation and training; and
government systems support services. The company reported fiscal
2011 sales of $15.2 billion.
Going forward, L-3 Communications expects its revenue for full-year
2012 to be in the range of $14.6 billion to $14.8 billion versus
its prior expectation of $14.4 billion to $14.6 billion. The
company expects operating margin of 10.1% and earnings per share in
the range of $8.45-$8.60 for fiscal 2012.
L-3 Communications remains a key player within the defense segment
and mainly competes with
FLIR Systems Inc.
). We believe it is one of the best-positioned pure defense plays
by virtue of its non-platform focus and a broad diversification of
L-3 Communications is strengthening itself by focusing on
improvement of operational efficiencies, investing in research and
development to provide affordable solutions, acquiring businesses
that will add new capabilities and expanding product lines and
divesting businesses. Moreover, its broad diversification of
programs would provide growth momentum. Going forward, we expect
future growth to come from the company's strong presence in the
current focus areas of C3ISR equipment; precision-guided weapons;
unmanned aerial vehicles ("UAVs"); and other electro-mechanical
However, we are concerned about the loss of key contracts, defense
spending cuts and lack of near-term catalysts. Order growth and
volume increases also remain dubious in this challenging
L-3 Communications presently retains a short-term Zacks #3 Rank
(Hold) that corresponds with our long-term Neutral recommendation
on the stock.