L-3 Communications Holdings, Inc. (LLL)

L-3 Communication Holdings, is the leading supplier of a broad range of products and services used in aerospace and defense platforms. The company acts as a supplier to the U.S. Defense Department's prime contractors and as a direct supplier to the military and intelligence agencies, with its key offerings comprising secure communications equipment, aircraft modernization, training and simulation, and intelligence, surveillance, and reconnaissance systems. With the addition of Titan to the L-3 family in 2005, the company has earned enhanced market penetration and renewed interest among the contractors.

As U.S. defense spending is likely to remain strong over the next several years, a relative healthy demand is being anticipated for defense products. Likewise, the FY-07 U.S. defense budget of about $510 billion highlights continued funding of at least modest growth in defense budgets in coming years. As a result, L-3 expects a continued demand for its products and is well-positioned to gain from additional spending on homeland security initiatives that focus on secure communications, explosive detection and passenger screening products.

Furthermore, a recent surge in passenger traffic, boosted by global economic growth and attractive fares has added to the industry’s commercial aircraft growth. Thus, L-3 has experienced steady growth and improved profitability recently and is expected to follow suit in the future also.

The firm has established a stable position in the defense arena because its products and their applications meet diverse needs across a spectrum of customers. The company affirms growth prospects as its sales are balanced among the segments and is not dependent on any one platform for a significant percentage of its sales. Also, the government’s decision to outsource intelligence services, training pilots in simulators, and modernizing planes rather than building new ones, will have a morale-boosting impact on the investors.

Defense contractor, way off its highs. Need I say more?

This company continues to work steadily in research in the homeland security sector, a steady source of funding historically and one that won't diminish even after an election that could unseat the base of power in Congress under Democratic leadership. The Democrats, over the next two years, will still support spending on Homeland Security funding to try to demonstrate that they care about the constituants.

This company is developing new and innovative technologies to detect explosives at public transportation terminals (remember, bus and train passenger screening in terminals is still a widely untapped market).

In addition, they have just been tapped by the military to provide specialized investigative resources to target insurgents equipped with materials and knowledge in the smuggling of components and manufacturing of improvised explosive devices.

This company, though stock prices are relatively high now, seems ready for a split, and is positioned much as Invision Technologies (INVN) was situated pre-9/11. INVN was purchased by GE within the last two years.

Waiting for administration change to determine what future holds.

Underpriced relative to near $5/sh earnings, great cash and cash flow, homeland security and intellegence markets. Should name CEO in next few weeks, beginning to get analyst upgrades. Wall street historical favorite with good past growth record, up 10+ % in last few weeks, with another 10% possible in next few weeks and 20 % by next March.

Sales have increased in each of the past 10 years. EPS has increased in each of the past 10 years. The profit margin has been fairly flat, (at about 8.5%), over the past 5 years. It would be better if it was increasing, but it is at least steady. The ROE has also been fairly flat for the past 5 years, averaging about 11.1%. Again, it would be better if it was increasing, but it is at least not decreasing. The debt-to-equity ratio has been decreasing for the past 2 years, after taking a big jump in 2005. The current P/E is above its historical averages, which is bad, as it could limit share price growth. However, it is below the maximums reached in three of the past 5 years, so the current P/E is not totally unreasonable. The PEG ratio is below 1.00, so this is good. The payout ratio is about 17%, so this is fairly low, so the dividend should be secure. The dividend yields about 1.1%, so decent, but nothing to write home about. I think this stock is a strong buy at anything less than $120.00 a share, and would be a decent buy up to $136.00 a share.

L-3 Communications is the 8th largest defense contractor in the world measured by 2007 defense related revenue. 81% of the total revenue in 2007 was related to defense.

Capital expenditure is large, debt levels are not low and return on equity is not extremly high, but LLL has grown shareholder equity at a steady pace in the past and will continue to do so in the future. That is no guarantee that can be given for the 499 other S&P500 companies.

Besides its well known technology, the company has a firm hold on Emergency Management and Consequence Management training contracts with the Department of Defense and multiple state governments. Within these 'boutique' contracts, the profit to cost margin is excellent.

Investing in technologies has dropped sharply

DSandler

makes good stuff for wars of the future. increasing need to replace attrition of stuff from current wars.

Target: $120+

DoD-based contractor with a great reputation and numerous specialties.

L-3 Communications (LLL) dropped another -2.7% on Tuesday to close at its lowest point since the Tuesday following MLK day in January. This "very big" declined was coupled with "very high" volume and a close below the lower bollinger band. LLL has lost -4.7% in the last 3 days and over -8% since the start of May.

Can the stock bounce back before setting new lows?

How has LLL responded to losing "very big" on "very high" volume while closing the day below its lower Bollinger band?

According to the 8 previous occurrences of this event [omitting any repeat occurrences within 10 trading days], E*Trade's EventEdge® indicates that LLL has shown a very strong bullish edge that peaks 45 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Tuesday, 3 June 2008) is Wednesday, 6 August 2008.

LLL rallies in 88% of the cases (7 of 8) by an average of 9.5% relative to the close on the event date. The average of the 1 decline is -0.9%. The overall return of the 8 cases is 8.2%, which, based on the close of LLL on the event date ($102.83), provides a target price of $111.26.

Going further into the future, however, new management appears to be focusing on more selective acquisitions, improving profit margins, creating more products that span business lines, and maximizing cash flow. By anticipating a greater focus on moderate share repurchases and dividend increases, L-3's mix of defense electronics and communications and government services are well matched with current military priorities, and I expect investors to benefit from what can be seen as strong organic sales growth, strong cash flow generation, and an attractive valuation. Following the above bullish event, I see this stock moving higher too.

ONE WORD-DEFENCE..TECHNOLOGY!..STOCK WILL INPROVE WILL HOLD AT 98.17..AT THIS TIME

With a more global outreach and greater emphasis worldwide on border and transit security, as well as development of more sophisticated avionics, we shuold see s steep increase in share price within the coming years.

Communications for the military

Looks good for 2008

Up up.