L-3 Gets $181M CDL Hawklink Contract - Analyst Blog


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L-3 Communications Holdings Inc. 's ( LLL ) division, Communication Systems-West (CS-West) has received a full-rate production contract for CDL Hawklink for the period 2012 to 2017. The contract is worth $181 million, of which $28 million will be received in full-year 2012. This contract follows a prior initial production contract worth $141 million that the company had received in June 2009.

L-3 Communication's Ku-Band CDL Hawklink system, a high-speed digital data link, broadcasts tactical video, radar and acoustic sensor data from the U.S. Navy's MH-60 Romeo Light Airborne Multi-Purpose System helicopter to its host surface ships. The CDL Hawklink system comprises AN/ARQ-59 airborne terminal and the AN/SRQ-4 shipboard terminal that allows doubling of the Hawklink's current data rates for the MH-60R at ranges to more than 100 nautical miles.

Besides supporting a full range of surveillance, anti-submarine warfare and recovery missions, the CDL Hawklink system is appropriate for a variety of platforms as they provide extended range, high data rates and proven operational reliability.

L-3's CS-West is a leader in communications systems for high-performance intelligence collection, imagery processing and satellite communications for the DoD and other government agencies.

There are few other contracts also flowing in for the company. Recently, the company's Link Simulation & Training UK business received a contract for the delivery of two A320 Full Flight Simulators and one A320 Flat Panel Trainer from China-based Spring Airlines. All the training devices will be supplied during the fourth quarter of 2013 to the airline's future training center at Shanghai Pudong International Airport.

Based in New York City, L-3 is a prime contractor in Command, Control, Communications, Intelligence, Surveillance and Reconnaissance systems, aircraft modernization and maintenance, and national security solutions. L-3 is also a leading provider of a broad range of electronic systems used on military and commercial platforms.

L-3 Communications' revenue base is spread across a broad diversification of programs that insulates it from risk. Over the longer run, we view the company as one of the best-positioned pure defense players based on its non-platform focus, broad diversification of programs and its focus on shareholder value.

However, negative offsets include the loss of key contracts, defense spending cuts and the lack of near-term catalysts. Order growth and volume increases also remain dubious in this challenging environment. Thus, we would advise investors to remain on the sidelines for now until the ongoing macro headwinds subside.

The company presently retains a short-term Zacks #4 Rank (Sell). We have a long-term Neutral recommendation on the stock.

The company mainly competes with Raytheon Company ( RTN ) and API Technologies Corporation ( ATNY ).

(ATNY): ETF Research Reports
L-3 COMM HLDGS (LLL): Free Stock Analysis Report
RAYTHEON CO (RTN): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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