L-3 a Well-Positioned Defense Play

L-3 Communications Holdings Inc. (LLL - Analyst Report) is a leading supplier of a broad range of products and services used in a number of aerospace and defense platforms. Our bullish outlook for the company and its shareholders is supported by LLL’s record order backlog, extension of the linguist contract and the related global linguist solutions subcontract, and strong first-quarter operating and financial results, in which the company delivered growth across multiple business segments. Hence, we maintain our Buy recommendation on the stock.

We continue to view LLL as one of the best-positioned pure defense plays by virtue of its non-platform focus, broad diversification of programs, and exposure to both the investment account and expanding order booking in the Specialized Products category driven by recent acquisitions of SSG and Nautronix. Furthermore, L-3 is well-positioned to become a significant market leader in providing technology for rail security.

Over the past twelve months, LLL traded within a range of 13.6x to 16.9x then current-year earnings estimates. As of this report, the stock trades below the mid-point of that range at 14.5x our 2008 EPS estimate and 13.0x our 2009 EPS estimate. We set a six-month target price of $109.25 or 16.1x our 2008 EPS estimate and 14.5x our 2009 estimate.

Read the full analyst report on LLL