On May 15, 2013, the shares of L-3 Communications Holdings Inc. (LLL) climbed to its 52-week high of $85.29 primarily driven by strong results in the first quarter of 2013 on strong international and commercial operations. We believe that operational efficiency, few strategic acquisitions, innumerable sizeable contracts and an effective cash deployment strategy have also led the company’s share to attain this high.
L-3 Communications continues to follow an effective cash deployment strategy. In Feb 2013, the board of directors authorized to repurchase up to an additional $1.5 billion of the company's common stock through Jun 30, 2015. During first-quarter 2013, the company repurchased $122 million of its common stock. Apart from share buybacks, L-3 Communications paid $52 million through dividends during the first quarter.
Going forward, we expect the incremental dividend and expanded share buybacks to make the stock more attractive for the investors. Moreover, the acquisitions of Kollmorgen Electro-Optical business and Thales Group will enhance L-3 Communications’ market position while expanding its commercial portfolio.
L-3 Communications provides a broad range of products and services used in a number of aerospace and defense platforms. The company’s Price to Book and Price to Sales multiples are lower than the peer group average, which implies that the stock is trading at a discount. It is making the shares of this company more attractive.
L-3 Communications’ full-year 2013 earnings guidance ranges from $8.15 to $8.35 per share, up from the year-ago figure of $8.01 per share. The Zacks Consensus Estimate for full-year 2013 is $8.17 per share, up 2.03% year over year. We expect the company’s long-term earnings growth to be 0.88%.
L-3 Communications currently has a Zacks Rank #3 (Hold). Apart from L-3 Communications, other stocks in the sector that are worth considering include Erickson Air-Crane Incorporated (EAC) with a Zacks Rank #1 (Strong Buy), and Wesco Aircraft Holdings, Inc. (WAIR) and Alliant Techsystems Inc. (ATK) with a Zacks Rank #2 (Buy).
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