Will L-3 Communications (LLL) Earnings Disappoint in Q3?
L-3 Communications Holdings Inc. (LLL) is scheduled to report third-quarter 2014 results before the opening bell on Oct 30. Last quarter, L-3 Communications posted a 2.5% negative earnings surprise. Let’s see how things are shaping up for the third quarter.
Factors to Consider this Quarter
L-3 Communications Holdings operates through its wholly owned subsidiary, L-3 Communications Corporation (L-3). L-3 Communications is a leading supplier of a broad range of aerospace and defense products.
L-3 Communications has been adopting an inorganic growth strategy to improve its competitiveness in the defense markets overseas. In addition, the company won a number of contracts on its varied programs.
However, L-3 Communications had to reduce its 2014 sales target from the Department of Defense from 2013 levels due to sequestration. Moreover, the company has been projecting weak performance in some of its product lines. This could have an adverse impact on L-3 Communications’ margins this quarter.
Earnings Whispers?
Our proven model does not conclusively show that L-3 Communications will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -2.14%. This is because the Most Accurate Estimate is at $1.83 per share while the Zacks Consensus Estimate is at $1.87 per share.
Zacks Rank: L-3 Communications’ Zacks Rank #4 (Strong Sell) when combined with a -2.14% ESP makes an earnings beat highly unlikely.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks in the same sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
Alamo Group, Inc. (ALG) has an earnings ESP of +4.44% and a Zacks Rank #2 (Buy).
Rockwell Collins Inc. (COL) has an earnings ESP of +2.38% and a Zacks Rank #3 (Hold).
Triumph Group, Inc. (TGI) has an earnings ESP of +0.71% and a Zacks Rank #3 (Hold).
Read the Full Research Report on COL
Read the Full Research Report on LLL
Read the Full Research Report on TGI
Read the Full Research Report on ALG
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