LLL Gets Joint Imaging Contract - Analyst Blog
2012年9月20日 - 11:45PM
Zacks
L-3 Communications Holdings
Inc. (LLL) along with fellow aerospace company
Exelis Inc. (XLS) was jointly awarded a $200
million firm-fixed-price contract. The award will provide for
the procurement of Enhanced 3rd Generation Aviator’s Night Vision
Imaging Systems. L-3 Communications expects to finish work on the
contract by September 3, 2017. The U.S. Army Contracting
Command, Aberdeen Proving Ground, Maryland, is the contracting
activity.
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 company has retained its profitable Cyber, Intelligence, and
Security Solutions business. The spin-off also removes a lot of
uncertainty with respect to revenue and takes away some of the low
margin businesses of the company. 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.
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.
L-3 Communications currently retains a Zacks #4 Rank, which
translates into a short-term Strong Sell rating. Over the longer
run, we maintain our Neutral recommendation on the stock.
(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
EXELIS INC (XLS): Free Stock Analysis Report
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