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This article is a follow up to our recent article on Elbit (NASDAQ:ESLT):

Following last week’s announcement that Elbit Systems (ESLT) will be supplying Lightweight Thermal Imagers to the Canadian and Israeli Armed Forces, as well as other customers worldwide, at a total value of approximately $50 million, the company just had another major military sale. It's selling almost $19 million of ruggedized computers to the U.S. Marines. The sale is going through Talla-Tech, a wholly-owned U.S. subsidiary of Tadiran Communications, which is a wholly-owned subsidiary of Elbit Systems.

The Marines order is for small hand-held computers to provide situational awareness to the forces. It chose the Talla-Tech Rugged Personal Digital Assistant (RPDA-57). The RPDA-57 is based on the Microsoft (NASDAQ:MSFT) Windows CE and Microsoft Windows Mobile operating system, Elbit Systems said.

Although Elbit’s rate of revenue growth has slowed slightly year-over-year, it is growing its net income at a rate 10% higher than last year (as per Q1 financials). When compared to some of its American competitors like General Dynamics (NYSE:GD) and Northrop Grumman (NYSE:NOC), Elbit’s rate of increase in revenue has been over 20%, compared with GD's 14% and NOC's 4%. On the other hand, with a trailing P/E of 25, it’s trading at a hefty premium to the others, whose P/E is in the mid to high teens. Having a lot of cash on hand, though, the company should have some staying power.

With the war on terror and potential conflict with Iran, the defense industry is poised to continue its explosive growth. Elbit should be able to capitalize on the opportunities.

Disclosure: The author’s fund is long ESLT as of June 6, 2007.

ESLT 1-yr chart
ESLT 1-yr chart

Douglas Goldstein is the Managing Director of America Israel Investment Associates, LLC.

Source: Elbit Sells Cutting-Edge Hardware to the U.S. Marines