L-3 Awarded Air Force Contract - Analyst Blog

L-3 Communications Holdings Inc. (LLL) has been awarded a five-year contract worth $152 million to provide information technology and cyber operations support to the U.S. Air Forces Central Command (USAFCENT). This firm-fixed-price, time and materials contract with a period of performance from 2010 to 2015 is a continuation of L-3’s long-term support of USAFCENT’s mission critical cyber operations.

Under the contract, L-3 will expand its cyber-focused support for the network operations of USAFCENT and the U.S. Central Command (USCENTCOM) at key locations and will provide fully credentialed cyber operators to manage, monitor and defend these systems against malicious attacks.

L-3 will also provide network and help desk support, information assurance, web development, project management, administrative services, logistics support, configuration management, and global command and control services under this contract.

Headquartered in New York, L-3 Communications is a leading provider of Intelligence, Surveillance and Reconnaissance 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.

L-3 Communications remains a key player within the defense segment and mainly competes with FLIR Systems Inc. (FLIR), Herley Industries Inc. (HRLY), and Raytheon Company (RTN). We believe it is one of the best-positioned pure defense plays by virtue of its non-platform focus, and broad diversification of programs.

Our bullish outlook for L-3 Communications is supported by its strong performance stemming from the command, control, communications, intelligence, surveillance and reconnaissance equipment, precision-guided weapons, unmanned aerial vehicles, and other electro-mechanical robotic capabilities, networked information technologies, special operations forces, and missile defense.

However, these are partially offset by risks related to key projects execution, divestitures, higher pension funding, and declining Linguist and commercial businesses revenues. We maintain our market Neutral recommendation on the stock.