L-3 makes secure and specialized systems for satellite, avionics, and marine communications, with a healthy percentage of its business coming from the U.S. Government.
Analysts like LLL's diversified revenue streams: specialized products (34%) intelligence/communications (22%) government services (25%), and aircraft modernization and maintenance (19%).
Further, analysts expect 7-10% organic revenue growth in 2008, including adequate growth in government service and specialized products revenue. The Reuters FY 2008/FY 2009 EPS consensus estimates for are LLL $6.73 to $7.45.
The risks? Analysts are keeping their eye on LLL's margins, high financial leverage, and ability to increase its low dividend. A substantial decline in U.S. defense spending would also hurt L-3's results.
The First Call mean rating for LLL is: Buy [15 firms]. Mean 2008 target: $122.00 [high: $130, low: $115].
Stock Analysis: L-3 Communications is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from LLL's shares. Sell / Stop Loss if you to purchase shares in this company: $78.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
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