L-3 Comm. Hits New 52-Week High

Zacks

On Apr 11, 2013, shares of L-3 Communications Holdings Inc. (LLL) hit a new 52-week high of $83.99. Earlier, in Jan 2012, the company had reported solid fourth-quarter results with a positive earnings surprise of 6.13%. L-3 Communications registered positive earnings surprises in all the four quarters of 2012, with an average beat of 6.7%.

Operational efficiency, a few valuable acquisitions, plenty of sizeable contracts, strong backlog and an effective cash deployment strategy have helped the company in achieving this high.

L-3 Communications is a leading supplier of a broad range of products and services used in a number of aerospace and defense platforms. Its inventory turnover of 31.31 times, compared to only 3.01 times for the Zacks industry average, represents a strong sign of operational efficiency. In addition, L-3 Communications’ operational effectiveness is evident in its industry-high Return on Investment (“ROI”) of 7.9%.

As of Dec 31, 2012, funded backlog at L-3 Communicationswas $10.9 billion, up 10% year over year. L-3 Communications has a strong balance sheet when compared to its peers with a low long-term debt-to-capitalization of 38.6% versus the Zacks industry average of 43.9%.

Also, L-3 Communications has an effective cash deployment strategy. In 2012, the company deployed $872 million to repurchase shares. In Feb 2013, the board of directors authorized a new share repurchase program allowing the company to repurchase up to an additional $1.5 billion of the company's common stock through Jun 30, 2015. The latest share repurchase authorization represents the company’s sixth buyback program. 

Besides share buybacks, L-3 Communications deploys cash by paying regular dividends. In Feb 2013, the company increased its annual dividend for the ninth consecutive time, bringing the annualized payout to $2.20 per share from $2 per share earlier. With the current adjusted closing price of $83.30, the company generates a dividend yield of 2.64%.

Going forward, we expect the incremental dividend and expanded share buybacks to make the stock more attractive for investors. Moreover, the acquisitions of Kollmorgen Electro-Optical business and Thales Group made in 2012 will enhance the company’s market position while expanding its commercial opportunities.

L-3 Communicationscurrently carries a Zacks Rank #3 (Hold). Other stocks to consider are Wesco Aircraft Holdings, Inc. (WAIR), FLIR Systems, Inc. (FLIR) Triumph Group, Inc. (TGI), all with a Zacks Rank #2 (Buy).

Read the Full Research Report on FLIR

Read the Full Research Report on LLL

Read the Full Research Report on TGI

Read the Full Research Report on WAIR

Zacks Investment Research



More From Zacks.com

Rates

View Comments (0)