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L3 Technologies (LLL) Q4 Earnings & Revenues Beat Estimates

Zacks Equity Research

L3 Technologies, Inc. LLL reported fourth-quarter 2018 adjusted earnings of $3.10 per share from continuing operations, which surpassed the Zacks Consensus Estimate of $2.66 by 16.5%.

Excluding one-time items, the company reported GAAP earnings of $2.83, compared to $3.34 in the year-ago quarter.

For 2018, L3 Technologies’ adjusted earnings were $10.75 per share, up 14% from $9.46 in the prior year. The full-year earnings figure surpassed the Zacks Consensus Estimate of $10.33 by 4.1%.

Total Revenues

In the quarter under review, total revenues came in at $2.77 billion, outpacing the Zacks Consensus Estimate of $2.72 billion by 1.8%. The top
line also improved 8% year over year.

Organic sales to the U.S. government rose 8%, while that to international and commercial customers improved 5%. Overall, organic sales were up 7%.

In 2018, total revenues increased 7% year over year to $10.24 billion. Full-year revenues surpassed the Zacks Consensus Estimate of $10.19 billion by a mere 0.5%.

Orders & Margin

Funded orders in the fourth quarter totaled $2.95 billion, reflecting an 8% rise from the year-ago quarter. Funded backlog was $9.70 billion as of Dec 31, 2018, up 14.3% from $8.49 billion as of Jan 1, 2018.

Operating margin expanded 180 basis points (bps) to 10.4% in the reported quarter.

Segmental Performance

Electronic Systems: Net sales at the segment improved 11% to $735 million from the prior-year quarter’s $661 million, driven by significant organic sales growth.

Operating income summed $100 million compared with $91 million in the year-ago quarter. However, operating margin contracted 20 bps to 13.6%.

Intelligence, Surveillance and Reconnaissance Systems (ISRS): The segment recorded net sales of $1,220 million in the fourth quarter, up 14% year over year. The upside can be attributed to higher sales volume related to procurement and ISR missionization of business jet aircraft systems.

Operating income increased to $127 million from $92 million in the year-ago quarter, whereas operating margin expanded 180 bps to 10.4%.

Communications and Networked Systems (C&NS): Net sales at the segment fell 3% to $816 million, owing to lower deliveries of networked communication products for the Warfighter Information Network-Tactical program and lower production volume for UAV communication systems for the U.S. Department of Defense (DoD) at Broadband Communication Systems.

Operating income decreased 13% to $74 million, whereas operating margin contracted 100 bps to 9.1%.

L3 Technologies Inc. Price, Consensus and EPS Surprise

L3 Technologies Inc. Price, Consensus and EPS Surprise | L3 Technologies Inc. Quote

Financial Position

As of Dec 31, 2018, L3 Technologies had $1,066 million in cash and cash equivalents compared with $662 million as of Dec 31, 2017.

Long-term debt as of Dec 31, 2018, was $3,321 million compared with $3,330 million as of Dec 31, 2017.

Net cash flow from operating activities amounted to $1,042 million at the end of 2018 compared with the year-ago cash flow of $985 million. Capital expenditures totaled $232 million compared with the year-ago figure of $224 million.

2019 View

Going into 2019, L3 Technologies anticipates net sales of $10.75 billion. The company also projects operating margin of 12% and effective tax rate of 20%. Additionally, it expects net cash from operating activities of $1,275 million, while expectation for free cash flow stands at $1,045 million.

From the context of its business segments, L3 Technologies anticipates net sales for its ISRS segment to be $4,700-$4,800 million, $3,125-$3,225
million for the C&NS segment and $2,775-$2,875 million for the Electronics Systems segment.

Zacks Rank

L3 Technologies currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Hexcel Corporation HXL reported fourth-quarter 2018 adjusted earnings of 82 cents per share, surpassing the Zacks Consensus Estimate of 80 cents by 2.5%.

Teledyne Technologies Inc. TDY reported adjusted fourth-quarter 2018 earnings of $2.33 per share, which surpassed the Zacks Consensus Estimate of $2.19 by 6.4%.

Textron TXT reported fourth-quarter 2018 adjusted earnings from continuing operations of $1.15 per share, which surpassed the Zacks Consensus Estimate of 98 cents by 17.3%.

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