Surveillance and aircraft modernization services provider L-3 Communications Holdings Inc. (LLL) is scheduled to announce third-quarter results before the market opens on Tuesday. On average, 15 analysts polled by Thomson Reuters expect the company to earn $1.85 per share for the quarter, while revenues for the quarter are estimated to be $3.89 billion. Analysts' estimates typically exclude special items.
L-3 is a prime system contractor in aircraft modernization and maintenance, or AM&M, command, control, communications, intelligence, surveillance and reconnaissance, or C3ISR, systems, and government services. The company also provides technology products, subsystems and systems. Its major customers include the United States Department of Defense and its prime contractors, United States Government intelligence agencies, the Unites States Department of Homeland Security, Unites States Department of State, United States Department of Justice and allied foreign governments.
The company operates in four segments: C3ISR, Government Services, AM&M, and Specialized Products. For the fiscal year ended December 31, 2008, L-3 generated $14.901 billion in sales, 36% of which came from the Specialized products segment, followed by Government Services, which generated about 29% of the annual sales. C3ISR and AM&M contributed about 17% each to the total sales for the fiscal year.
L-3 operates in a sector that is more or less insulated from the vagaries of weather, recession, currency fluctuation and piled up inventories. However, the shift in U.S. government's focus to insurgencies and beefing up security systems rather than fighting traditional wars, which the Bush Administration followed, is perceived to affect the sales of defense contractors.
Last week, Lockheed Martin Corp. (LMT) reported a 4.5% increase in its third-quarter sales and witnessed just over 1% growth in its segment operating profit. Although quarterly profit increased marginally year-over-year, the company issued a lackluster guidance for 2010. Lockheed suffered cancellations of several of its defense contracts this year.
Later in an interview with the Wall Street Journal, Lockheed's chief financial officer Bruce Tanner said slower spending growth at the U.S. Department of Defense prompted the company to a make a conservative financial forecast for 2010. There is a possibility that earnings will come in lower than 2009, Tanner reportedly said.
Aerospace and defense giant Boeing Co. (BA) last week reported a net loss for the quarter, on account of certain charges. The company's total revenues for the quarter grew 9% to $16.69 billion. Among segments, revenues at Boeing Integrated Defense Systems rose 3% from last year and its earnings from operations increased 4%. IDS' backlog reduced to $65.8 billion, nearly two times expected 2009 revenues, primarily due to termination of the manned ground vehicle portion of the Future Combat Systems contract due to changing U.S. defense priorities. Boeing Military Aircraft third-quarter revenue rose 7% from a year ago, while earnings from operations climbed 25%.
Diversified technology and manufacturing company Honeywell International Inc. (HON), which posted a decline in third-quarter profit last week, said in a conference call later that its Defense and space sales were up 2% in the quarter, reflecting growth in both U.S. and foreign military OE sales including continued demand for retrofit Chinook Heavy Lift helicopters.
In July, L-3 reported a drop in second-quarter profit, hurt by pension-related expenses and absence of certain gains recorded in the prior-year quarter. Net income attributable to L-3 common shareholders dropped to $223 million or $1.90 per share from $273 million or $2.21 per share in the same quarter a year ago. Net income was $227 million, down from $278 million in the year-earlier quarter. Sales for the quarter rose 6% to $3.93 billion from $3.72 billion in the prior-year quarter.
While announcing the second-quarter results, L-3 said it now expects full year 2009 earnings in the range of $7.25 to $7.35 per share, up from the prior range of $7.17 to $7.32 per share. The company is likely to update this forecast today.
The new thought is that companies that do not deviate from traditional style weapon manufacturing stand to gain very less from future defense spending. It is presumed that such companies are likely to see flat or lower revenues in 2010. Early this month, Goldman Sachs reportedly lowered its rating on L-3 to ''Sell'' from ""Neutral", citing revenue pressures, stemming from lower exposure to Iraq and more government insourcing, which could see the company issuing a depressing 2010 outlook. The firm expects the revenue guidance to be 4% to 5% below the Wall Street consensus. Analysts have a consensus revenue estimate of $16.07 billion for 2010.
On October 12, FBR Research lowered its 2010 earnings per share expectation for the company by 4.8% to $7.90 from $8.30 and its revenue estimate for the company by 4.2% to $15.9 billion from $16.6 billion. The firm also reduced its price target to $94.00 from $106.00. The revision was attributed to an ongoing program protest in L-3's aircraft maintenance and modernization business related to the loss of the JOG program and the negative impact on a program in the company's government services business related to base realignment and closure, or BRAC.
The JOG program was a multi-year program valued at about $5 billion. FBR Research excluded the potential for an L-3 win in this regard, while arriving at its revenue estimate for 2010. The brokerage further said that due to the latest BRAC initiative, some government services contracts are being condensed and modified, eliminating the role of subcontractors. This could affect L-3, as in one of its many government services contracts, the company is acting as a subcontractor to a prime.
LLL closed Monday's regular trade at $74.16, down $0.26 or 0.35%, on 1.25 million shares. For the past year, the stock traded in the range of $57.12-$83.19.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.