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L-3 Comms Wins Defense Deals

Zacks Equity Research

The Department of Defense (DoD) handed out multiple contracts worth $10.92 billion as its fiscal 2013 draws to a close. Among the chief winners was L-3 Communications Holdings Inc. (LLL), which won four contracts valued at a total $163.0 million. Other major winners included Lockheed Martin Corp. (LMT), Raytheon Company (RTN) and Northrop Grumman Corp. (NOC).

A contract worth $63.4 million went to L-3 Communications Systems for the delivery of Advanced Extremely High Frequency (:AEHF) COMSEC TRANSEC SYSTEM hardware to the U.S. Air Force. Air Force Life Cycle Management Center, Cryptologic and Cyber Systems Contracting Division/HNCK, San Antonio, Texas, is the contracting authority.

The contract is expected to run through Dec 31, 2018. The COMSEC TRANSEC SYSTEM is used for receiving and sending both classified and unclassified military communications. Intelligence and reconnaissance operations are a critical backbone of the U.S. defense. The AEHF COMSEC TRANSEC system is the next step in the advancement of the military’s future communication satellite systems.

The second contract priced at $55.6 million was awarded to L-3 Communications Systems Field Support for aircraft maintenance and logistical life cycle support on 54 Beechcraft C-12 Huron transport aircraft for the U.S. Navy and Marine Corps. Of these 48 aircraft belong to the Navy and the rest to the Marine Corps. The deal will expire by Sep 2014.

Two smaller contracts valued at $31.4 million and $12.3 million received by the company were for the delivery of FUM-153 A/B Point Detonating/Delay fuses to the U.S. Army and for the supply of Video Data Link systems, common data link waveform documentation and wave form testing equipment, respectively. The latter also involves providing training to the Air Force regarding its use. The Air Force deal will be completed by Sep 2015.

Despite the challenges from the sequester, L-3 Communications remains well positioned on the back of its diversified operations and technological upgrades. The company recently booked a $357 million task order from the GSA Federal Systems Integration and Management Center. 

In addition, better prospects from overseas customers are expected to lead to earnings accretion. L-3 Communications presently carries a Zacks Rank #3 (Hold).

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