Insiders Are Selling L-3 Communications Holdings

Nov. 5.13 | About: L-3 Communications (LLL)

In this article, I will feature one industrial goods company that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

L-3 Communications Holdings (NYSE:LLL) provides command, control, communications, intelligence, surveillance, and reconnaissance systems; aircraft modernization and maintenance; and national security solutions in the United States and internationally.

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Insider selling during the last 30 days

Here is a table of L-3 Communications Holdings' insider-trading activity during the last 30 days by insider.

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Susan Opp SVP Oct 31 49,097 No 20,057 shares 71.0%
John McNellis SVP Oct 31 46,947 No 17,715 shares 72.6%
Steven Post SVP Oct 31 24,041 No 19,269 shares 55.5%
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There have been 120,085 shares sold by insiders during the last 30 days. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

Here is a table of L-3 Communications Holdings' insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
October 2013 120,085 0
September 2013 0 0
August 2013 233,382 0
July 2013 193,061 0
June 2013 0 0
May 2013 15,937 0
April 2013 8,099 0
March 2013 0 0
February 2013 102,478 0
January 2013 0 0
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There have been 673,042 shares sold and there have been zero shares purchased by insiders this year.

Financials

L-3 Communications Holdings reported the third-quarter (PDF) financial results on October 29 with the following highlights:

Revenue $3.0 billion
Net income $204 million
Cash $377 million
Debt $3.6 billion
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(Source: Third-quarter earnings presentation (PDF))

Outlook

L-3 Communications Holdings' guidance for full-year 2013 is as follows:

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(Source: Third-quarter earnings presentation (PDF))

Competition

L-3 Communications Holdings' competitors include AAR Corp. (NYSE:AIR), and Cubic Corporation (NYSE:CUB). Here is a table comparing these companies.

Company LLL AIR CUB
Market Cap: 8.93B 1.12B 1.41B
Employees: 51,000 6,300 8,200
Qtrly Rev Growth (yoy): -0.09 -0.07 -0.07
Revenue: 12.93B 2.10B 1.38B
Gross Margin: 0.10 0.15 0.24
EBITDA: 1.56B 185.50M 137.57M
Operating Margin: 0.10 0.05 0.08
Net Income: 794.00M 52.90M 79.06M
EPS: 8.62 1.38 2.96
P/E: 11.69 21.13 17.88
PEG (5 yr expected): 5.82 1.18 2.14
P/S: 0.69 0.54 1.03
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L-3 Communications Holdings has the highest PEG ratio among these three companies.

Here is a table of these competitors' insider-trading activities this year.

Company Insider buying / shares Insider selling / shares
AIR 0 98,474
CUB 0 2,662,250
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Only L-3 Communications Holdings has seen intensive insider selling during the past 30 days.

Conclusion

There have been three different insiders selling L-3 Communications Holdings and there have not been any insiders buying L-3 Communications Holdings during the past 30 days. All three of these insiders decreased their holdings by more than 10%. L-3 Communications Holdings has an insider ownership of 0.80%.

L-3 Communications Holdings is trading at a P/E ratio of 11.69 and a forward P/E ratio of 12.30. L-3 Communications Holdings has a book value of $62.29 per share.

Before entering short L-3 Communications Holdings, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are relatively high PEG ratio and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.