L-3 Communications Holdings Inc.
) has received a five-year contract worth $1.98 billion for
rotary-wing aircraft maintenance and logistics support at Fort
Rucker, Alabama from the U.S. Army Contracting Command on behalf of
U.S. Army Aviation and Missile Life Cycle Management Command
(AMCOM). The contract has a one-year base period and four one-year
A rotorcraft or rotary wing aircraft is a heavier-than-air flying
machine that uses lift generated by wings, called rotor blades that
revolve around a mast. Rotorcraft generally includes those aircraft
where one or more rotors are required to provide lift throughout
the entire flight, such as helicopters, cyclocopters, autogyros,
Per the contract, the company will be responsible for providing
maintenance, logistics and other related sustainment support
services for more than 600 helicopters used by the U.S. Army
Aviation Center of Excellence and the U.S. Air Force Air Education
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. 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
Recently, L-3 Communications completed the spin-off of 100% of a
new, independent, publicly traded government services company -
Engility Holdings, Inc.
) - to L-3 shareholders. We believe that L-3 Communications has
ample opportunity for growth and profit expansion after the
favorable conclusion to the spin-off of its Government Services
businesses. The spin-off will remove a lot of uncertainty with
respect to revenue and will also take away some of the lowest
margins at the company.
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 #3 Rank (Hold)
that corresponds with our long-term Neutral recommendation on the
(EGL): ETF Research Reports
L-3 COMM HLDGS (LLL): Free Stock Analysis
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L-3 Communications is expected to release its second quarter 2012
results tomorrow. The Zacks Consensus Estimate for second quarter
2012 and fiscal 2012 are $2.01 and $8.33, respectively.