L-3 Communications Holdings Inc.
(
LLL
) was awarded a $31.8 million firm-fixed-price contract by the
Naval Air Warfare Center, Lakehurst, New Jersey. Per the contract
the company will supply 40 MX-15HDi Turrets and associated field
service support. Work on the contract will be performed in
Burlington, Ontario, Canada; Santa Rosa, California, and
Afghanistan. L-3 Communications expects to finish work on the
contract in February 2013.
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.
Recently, in July 2012, L-3 Communications completed the spin-off
of 100% of a new, independent, publicly traded government services
company -
Engility Holdings Inc.
(
EGL
) - 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 removed a lot of uncertainty with respect
to revenue and will also take away some of the lowest margins at
the company.
L-3 Communications remains a key player within the defense segment
and mainly competes with
FLIR Systems Inc.
(
FLIR
) and
Raytheon Company
(
RTN
). We believe it is one of the best-positioned pure defense plays
by virtue of its non-platform focus and a broad diversification of
programs.
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
robotic capabilities.
This was reflected in the company's recently reported second
quarter results with the top and bottom lines surpassing the
corresponding Zacks Consensus Estimates with ease. Going forward,
we expect the company to continue posting strong earnings based on
its opportunities in growth areas, including Intelligence,
Surveillance, and Reconnaissance, Electro-Optical/Infrared systems
and cyber security.
Moreover, the company's balanced business mix, improving
operational efficiencies and focus on research and development
allow it to pursue strategic opportunities in the commercial arena
and in overseas markets.
Also, with the completion of the spin-off, the company will be able
to focus more on core areas by providing market-leading,
value-added products and solutions to its customers. In the long
run, we expect the company to be one of the best-positioned pure
defense players based on its broad diversification of programs and
its focus on shareholder value. However, we remain concerned about
the loss of key contracts, defense spending cuts and the lack of
near-term catalysts.
The company presently retains a short-term Zacks #3 Rank (Hold)
that corresponds with our long-term Neutral recommendation on the
stock.
L-3 Communications Holdings operates through its wholly owned
subsidiary, L-3 Communications Corporation. L-3 Communications is a
leading supplier of a wide range of products and services used in a
number of aerospace and defense platforms.
(EGL): ETF Research Reports
FLIR SYSTEMS (FLIR): Free Stock Analysis Report
L-3 COMM HLDGS (LLL): Free Stock Analysis
Report
RAYTHEON CO (RTN): Free Stock Analysis Report
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