About L-3 Communications
L-3 Communications: An analysis of the Q3 2014 earnings (Part 1 of 9)
Company profile
L-3 Communications Holdings Inc. (LLL) is an American company that does business in the aerospace and defense sectors. The company ranks among the top ten defense contractors in the world. It provides the following products and services:
ISR (intelligence, surveillance, and reconnaissance) systems
aircraft modernization and maintenance
command, control, and communication solutions
national security solutions
government consulting
electronic systems for military and commercial platforms
Here are some of the company’s clients:
US Department of Defense
US Department of Homeland Security
US government intelligence agencies
NASA
aerospace contractors
commercial telecommunications and wireless customers
Other defense contractors include the Boeing Company (BA), Raytheon Company (RTN), and General Dynamics Corporation (GD). All of these companies are part of the Dow Jones US Select Aerospace & Defense Index (ITA).
3Q14 performance
L-3 Communications posted a revenue decline of 2% year-over-year to $2.94 billion. It recorded earnings of $1.78 a share, down 19% from last year. Its operating margins fell by 150 basis points to 8.7%, while operating income fell by 16% year-over-year to $257 million. The funded orders in the quarter were down 10.4% year-over-year to $2.44 billion.
The company’s results suffered due to the weakness of its Aerospace Systems segment. Factors that contributed to this included poor sales, order delays and reductions, and an expenditure of $24 million in legal costs due to the company’s internal review.
A lower tax rate helped to offset the aerospace segment’s lower-than-expected performance. Net sales to international and commercial customers increased by 3% for the quarter to $842 million versus $816 million for the same time last year. This growth reflected the company’s focus on expanding beyond domestic boundaries.
In the next article, we will look at the performance of the company’s largest business segment, Aerospace Systems.
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