L-3 Communications to Sell Marine Systems International - Analyst Blog
L-3 Communications Holdings Inc. (LLL) inked a definitive agreement with Wärtsilä Corporation to sell its Marine Systems International (L-3 MSI) business.
The contract has a base price of approximately $355.9 million (€285 million). Wärtsilä Corporation will assume L-3 MSI’s employee pension-related liabilities which will lead to an estimated reduction of $74.9 million (€60 million) to its base purchase price.
Subject to regulatory approvals and customary closing conditions, the transaction is expected to close in the second half of next year.
L-3 Communications’ L-3 MSI is a part of its Electronic Systems business segment. Headquartered in Hamburg, Germany, L-3 MSI focuses on the commercial ship industry and engages in the supply of electrical systems, integrated navigation and power and propulsion systems for all types of ships. L-3 MSI currently has a presence in 14 countries and employs more than 1,700 workers.
L-3 MSI projects 2014 sales to be around $500 million with an operating margin of 6.5%. Divesting its L-3 MSI unit is a part of L-3 Communications’ portfolio reshaping strategy. The management believes that this transaction will open up new prospects for the business and at the same time allow it to gather more focus on its core operations.
L-3 Communications recently posted third-quarter earnings in line with estimates. Reported earnings of $1.85 per share were, however, lower than the previous year’s adjusted earnings of $1.93 per share. Revenues lagged estimates and also registered a fall of 2% on a year-over-year basis.
On its third-quarter earnings call, the company lowered its 2014 earnings guidance to the range of $7.30−$7.50 per share from $7.90–$8.10 per share earlier. The Zacks Consensus Estimate for 2014 earnings is currently at $7.44 per share.
Zacks Rank
L-3 Communications Holdings currently has a Zacks Rank #4 (Sell).
Better-ranked stocks in the aerospace and defense equipment industry include Spirit AeroSystems Holdings, Inc. (SPR), Teledyne Technologies Inc. (TDY) and Hexcel Corp. (HXL). While Spirit AeroSystems Holdings and Teledyne Technologies hold a Zacks Rank #1 (Strong Buy), Hexcel Corp. carries a Zacks Rank #2 (Buy).
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