L-3 Bags Air Force Contract

L-3 Communications Holdings Inc. (LLL - Analyst Report) yesterday bagged a $680 million contract from the US Air Force to serve as prime contractor on the T-1A Contractor Logistics Support (CLS) program. This will boost the dwindling order backlog of the company, which fell 20% year-over-year in the second quarter of fiscal 2009 to $3.3 billion.

The 60-day base contract, with eight option years, would be serviced by L-3's Systems Field Support operating unit, based in Madison, Mississippi. The company would provide program management of logistics, material supply support and repair overhaul services for 179 T-1A aircraft based at Vance Air Force Base, Oklahoma; Columbus Air Force Base, Mississippi; Pensacola Naval Air Station, Florida; and the Randolph and Laughlin Air Force Bases, Texas.

Headquartered in New York, L-3 Communications is a leading provider of Intelligence, Surveillance and Reconnaissance (ISR) systems and products; secure communications systems; aircraft modernization, training and government services; and is a merchant supplier of a broad array of high technology products. Its major customers are the Department of Defense (DoD), U.S. government intelligence agencies, major aerospace and defense prime contractors, foreign governments, and commercial telecommunication and wireless customers.

L-3's product mix is approximately 88% defense and 12% commercial. The company functions through four primary business segments: Specialized Products; Government Services; Aircraft Modernization and Maintenance (AM&M); and Command, Control, Communications and Intelligence, Surveillance, and Reconnaissance (C3ISR).

The company trades at a discount to its industry peers in terms of price-to-book, price-to-sales, and price-to-future cash flow. We maintain our market Outperform recommendation on the shares.

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