A L-3 Communications (LLL) division recently won a follow-on contract for its Laser Marksmanship Training System (LMTS) from the US Army’s Program Executive Office for Simulation, Training and Instrumentation.
The deal is of indefinite delivery/indefinite quantity (ID/IQ) type, having a tentative value of $48.7 million spread over the initial base year and four option years. The company has received the contract’s first delivery order of $15.5 million.
We view L-3 as one of the best-positioned pure defense plays for its non-platform focus, broad diversification of programs and large order bookings. The company is also growing through frequent earnings accretive acquisitions.
Our bullish outlook for L-3 is supported by strong operating results and robust cash flow (mainly in the C3ISR and Specialized Products segments), disposal of non-core businesses and the GLS subcontract, which is partially offset by divestitures, higher pension funding and declining Linguist and CFT revenues. We maintain our Outperform recommendation for the company.
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