L-3 Estimates Rise on New Contract with UK Ministry of Defense

One of the recent contracts awarded to L-3 Communications (LLL) was an $18 million contract by the U.K. Ministry of Defense (MoD), Royal Air Force. L-3 continues to outperform its peers in both the growth and income categories. The company’s ROE of 13% is above the industry average of 11%. Its dividend yield of 1.1% tops the industry average of 0.1%.

Company Description

L-3 Communications supplies a broad range of products and services used in a substantial number of aerospace and defense platforms. The company is also a prime contractor in Command, Control and Communications, Intelligence, Surveillance and Reconnaissance (C³ISR), Government Services, Aircraft Modernization and Maintenance (AM&M) and has the broadest base of Specialized Products in the industry.

L-3 is also a major provider of homeland defense products and services for a variety of emerging markets.

The company’s customers include the U.S. Department of Defense (DoD) and its prime contractors, the U.S. Department of Homeland Security [DHS], U.S. Government intelligence agencies, major aerospace and defense contractors, allied foreign government ministries of defense, commercial customers and certain other U.S. federal, state and local government agencies.

Recent Contract Win

L-3 recently announced that its SPAR subsidiary has been awarded an $18 million contract by the U.K. Ministry of Defense (MoD), Royal Air Force to perform outer wing replacements on three C-130K aircraft.

"We are pleased that the MoD and Royal Air Force have entrusted us with this C-130 outer wing program," said Sylvain Bedard, president of L-3 SPAR. "We have developed innovative and unique wing improvement programs for the Canadian C-130 fleet for over 40 years, and this award is a reflection of our market leadership in C-130 life extension programs."

Growth

The company announced second quarter results in late July. Earnings per share of $1.67, excluding items, topped the year-ago $1.49 and exceeded the consensus estimate by 2.45%. Net sales grew by 9% to $3.7 billion from last year’s $3.4 billion.

L-3 noted that it had record funded orders of $4.2 billion and ended June with record funded backlog of $11 billion.

Higher Estimates

Analysts are calling for full-year 2008 earnings of $7.20 per share, up from the two months-ago level of $6.66.

Income

The company declared a quarterly dividend of 30 cents per share in early July. The dividend is payable on September 15 to shareholders of record at the close of business on August 18.

L-3 offers a dividend yield of 1.1%, well above the industry average, which is at a mere 0.1%.

The company stated in its second-quarter report that it had record free cash flow of $502 million in the 2008 second quarter, and continued to deploy the company's cash flow to increase shareholder value with share repurchases of $217 million, dividends of $37 million, and business acquisitions of $175 million.