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What's in Store for L3 Technologies' (LLL) Q1 Earnings?

Zacks Equity Research

L3 Technologies Inc. LLL is set to release first-quarter 2019 results on May 1, before the market opens.


In the last reported quarter, the company delivered a positive earnings surprise of 16.54%. Moreover, L3 Technologies outperformed the Zacks Consensus Estimate in two of the trailing four quarters, the average positive surprise being 10.38%.


Let’s see how things are shaping up prior to this announcement.


Factors Under Consideration

L3 Technologies' Communications and Network Systems sales are expected to bounce back to growth on account of growing customer demand, beginning in 2019, after facing headwinds last year. This, in turn, may have a favorable impact on the company’s first-quarter revenues. As a result, the company expects 5-6% sales growth for the to-be-reported quarter.

In line with this, the Zacks Consensus Estimate for the company's revenues is pegged at $2.52 billion, implying a 6.5% rise from the year-ago quarter’s reported figure.


For the first quarter, L3 Technologies anticipates operating margin to expand 50-70 basis points. Considering this, we may expect the company’s first-quarter results to reflect solid bottom-line performance as well. In line with these projections, the Zacks Consensus estimate for the company’s earnings of $2.52 indicates 7.7% growth from the figure reported in the year-ago quarter.


In the to-be-reported quarter, L3 Technologies increased its dividend by 6.25% to 85 cents per share, which reflects its strong cash flow position. 


In October 2018, the company and Harris Corporation announced the biggest ever defense merger, which is approximately worth $33.5 billion, per The Economist. The merger, which is expected to close mid 2019, was recently approved by the stockholders of both the companies. We expect further updates on the merger with the release of the quarterly results.


Earnings Whispers


Our proven model does not show that L3 Technologies is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.


Earnings ESP: L3 Technologies has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.


Zacks Rank: The company currently carries a Zacks Rank #3, which increases the probability of an earnings beat. But an Earnings ESP of 0.00% makes surprise prediction difficult.


Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.


L3 Technologies Inc. Price and EPS Surprise



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

Stocks to Consider


Here is a defense company you may want to consider, as our model shows that it possesses the right combination of elements to post an earnings beat this quarter:


Huntington Ingalls Industries, Inc. HII is expected to report first-quarter 2019 results on May 2. The company has an Earnings ESP of +1.93% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.


Recent Defense Releases


Textron Inc. TXT reported first-quarter 2019 earnings from continuing operations of 76 cents per share, which surpassed the Zacks Consensus Estimate of 70 cents by 8.6%.


Lockheed Martin Corp. LMT reported first-quarter 2019 earnings of $5.99 per share, which surpassed the Zacks Consensus Estimate of $4.29 by 39.6%.


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