Couple of Contracts for L-3 – Analyst Blog

Being one of the principal contractors for the U.S. Army and Air Force Joint Cargo Aircraft (“JCA”) program, L-3 Communications (LLL) has won a contract worth more than $200 million from JCA Joint Program Office to deliver eight additional C-27J JCA aircraft. The eight aircraft are scheduled for delivery between July 2012 and April 2013.

 

The C-27J JCA aircraft will have specialized equipment required to support medical evacuation, troop movement and air drop missions.

 

With this contract win, JCA Joint Program will have 21 aircraft from L-3 Communications. L-3 Communications has already delivered four other aircraft since the original contract was awarded in 2007.

 

In a separate development, a subsidiary of L-3 Communications, WESCAM, won a third indefinite delivery/indefinite quantity (ID/IQ) contract worth $200 million from the U.S. Air Force. WESCAM won three ID/IQ contracts worth $400 million over the past 18 months.

 

Through these contracts, the U.S. Air Force purchased six different models of MX turrets featuring high-reliability, long-range performance, precision target location accuracy and ease-of-use on a variety of platforms. WESCAM sensors supply highly stabilized full-motion EO/IR video in support of U.S coalition forces and troop operations.

 

During the first-quarter conference call, L-3 Communications provided earnings per share guidance in the range of $8.13 to $8.33 for full year 2010. The Zacks Consensus Estimate for the second quarter of 2010 is earnings of $1.93 per share. For the full year, the Zacks Consensus Estimate is earnings of $8.20 per share and for 2011 it is $8.86 per share.

 

Headquartered in New York, L-3 Communications is a leading provider of Intelligence, Surveillance and Reconnaissance (ISR) systems and products; secure communications systems; aircraft modernization, training and government services; and is a merchant supplier of a broad array of high technology products.

 

Broad diversification of programs, strong order bookings and order backlog, solid cash flow generation and focus on enhancing shareholder value differentiate L-3 Communications from other players.

 

The product mix of L-3 Communications is highly skewed toward defense. On the flip side, an expected cut back on defense expenses by $100 billion over the next five years will likely have an adverse effect on the future prospect of the company. We therefore, maintain our “Neutral” recommendation on the company. The quantitative Zacks #3 Rank (Hold) for the company indicates no clear directional pressure on the shares over the near term.