On Apr 11, 2013, shares of
L-3 Communications Holdings Inc.
) hit a new 52-week high of $83.99. Earlier, in Jan 2012, the
company had reported solid fourth-quarter results with a positive
earnings surprise of 6.13%. L-3 Communications registered
positive earnings surprises in all the four quarters of 2012,
with an average beat of 6.7%.
Operational efficiency, a few valuable acquisitions, plenty of
sizeable contracts, strong backlog and an effective cash
deployment strategy have helped the company in achieving this
L-3 Communications is a leading supplier of a broad range of
products and services used in a number of aerospace and defense
platforms. Its inventory turnover of 31.31 times, compared to
only 3.01 times for the Zacks industry average, represents a
strong sign of operational efficiency. In addition, L-3
Communications' operational effectiveness is evident in its
industry-high Return on Investment ("ROI") of 7.9%.
As of Dec 31, 2012, funded backlog at L-3 Communicationswas
$10.9 billion, up 10% year over year. L-3 Communications has a
strong balance sheet when compared to its peers with a low
long-term debt-to-capitalization of 38.6% versus the Zacks
industry average of 43.9%.
Also, L-3 Communications has an effective cash deployment
strategy. In 2012, the company deployed $872 million to
repurchase shares. In Feb 2013, the board of directors authorized
a new share repurchase program allowing the company to repurchase
up to an additional $1.5 billion of the company's common stock
through Jun 30, 2015. The latest share repurchase authorization
represents the company's sixth buyback program.
Besides share buybacks, L-3 Communications deploys cash by
paying regular dividends. In Feb 2013, the company increased its
annual dividend for the ninth consecutive time, bringing the
annualized payout to $2.20 per share from $2 per share earlier.
With the current adjusted closing price of $83.30, the company
generates a dividend yield of 2.64%.
Going forward, we expect the incremental dividend and expanded
share buybacks to make the stock more attractive for investors.
Moreover, the acquisitions of Kollmorgen Electro-Optical business
and Thales Group made in 2012 will enhance the company's market
position while expanding its commercial opportunities.
L-3 Communicationscurrently carries a Zacks Rank #3 (Hold).
Other stocks to consider are
Wesco Aircraft Holdings, Inc.
FLIR Systems, Inc.
Triumph Group, Inc.
), all with a Zacks Rank #2 (Buy).
FLIR SYSTEMS (FLIR): Free Stock Analysis
L-3 COMM HLDGS (LLL): Free Stock Analysis
TRIUMPH GRP INC (TGI): Free Stock Analysis
WESCO AIRCRAFT (WAIR): Free Stock Analysis
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