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Defense contractor L3 Technologies, Inc. posted first-quarter 2017 earnings of $2.07 per share from continuing operations, beating the Zacks Consensus Estimate of $1.81 by 14.4%. Earnings however declined 0.5% from the year-ago figure of $2.08.
Total Revenue
Total revenue of $2.67 billion in the quarter surpassed the Zacks Consensus Estimate of $2.46 billion by 8.4%. Revenues were also up 13% year over year.
Organic sales to the U.S. government increased 13%, while that to international and commercial customers were up 8%. Overall, organic sales increased 11% in the first quarter.
L-3 Communications Holdings, Inc. Price, Consensus and EPS Surprise
Funded orders in the reported quarter were $2.62 billion, reflecting a 1% year-over-year rise. Funded backlog was $8.86 billion as of Mar 31, 2017, down 0.5% from $8.90 billion as of Dec 31, 2016.
Operating margin contracted 120 basis points (bps) to 9.5% in the first quarter.
Segmental Performance
Effective Mar 1, 2017, the company realigned its Electronic Systems. The Electronic Systems segment has been divided into two segments – Electronic Systems and Sensor Systems. Accordingly, the company’s structure comprises the following four segments:
Electronic Systems: Net sales at the segment increased 24.3% to $737 million from the prior-year figure of $593 million, mainly on account of significant organic sales growth.
Operating income was $91 million, compared to the year-ago number of $85 million, while operating margin contracted 200 bps to 12.3%.
Aerospace Systems: The segment recorded net sales of $1,045 million in the reported quarter, up 4%. The upside was driven by higher sales of Vertex Aerospace and ISR Systems.
Operating income dropped 34.9% to $69 million, while operating margin contracted 390 bps to 6.6%.
Communication Systems: Net sales at the segment improved 14% to $537 million, primarily due to increased volume and deliveries of secure networked communication systems to the U.S. Department of Defense (DoD) and deliveries of tactical communication terminals to the U.S. military.
Operating income declined 15.7% to $43 million and operating margin contracted 280 bps to 8%.
Sensor Systems: Net sales at the segment grew 23.2% to $350 million, primarily buoyed by organic sales growth.
Operating income rose 400% to $50 million and operating margin expanded 1,080 bps to 14.3%.
Financial Position
As of Mar 31, 2017, L3 Technologies had $230 million in cash and cash equivalents, compared with $363 million as of Dec 31, 2016.
Long-term debt as of Mar 31, 2017, was $3,326 million, compared with $3,325 million as of Dec 31, 2016.
Net cash from operating activities was $85 million at the end of the end of the first quarter, down 24.1% from the year-ago figure. Capital expenditure totaled $42 million, compared with $35 million in the prior year.
2017 Guidance
L3 Technologies has raised its 2017 outlook again. The company now expects earnings in the range of $8.50−$8.70 per share (versus the prior range of $8.40−$8.60) and revenues of $10,750−$10,950 million (the prior range being $10,625−$10,825 billion) for 2017.
However, the company continues to expect cash from operations of around $1,085 million and resultant free cash flow of $865 million.
Peer Earnings Review
General Dynamics Corporation (GD - Free Report) reported first-quarter 2017 earnings from continuing operations of $2.48 per share, beating the Zacks Consensus Estimate of $2.32 by 6.9%. Its first-quarter total revenue of $7,441 million missed the Zacks Consensus Estimate of $7,595 million by 2%.
Northrop Grumman Corporation (NOC - Free Report) reported first-quarter 2017 earnings of $3.63 per share, beating the Zacks Consensus Estimate of $2.90 by 25.2%. Its total revenue of $6.27 billion surpassed the Zacks Consensus Estimate of $6.12 billion by 2.5%.
Lockheed Martin Corp. (LMT - Free Report) reported first-quarter 2017 earnings from continuing operations of $3 per share, beating the Zacks Consensus Estimate by 8.7%. However, total revenue of $11.06 billion missed the Zacks Consensus Estimate by 1.8%.
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L3 Technologies (LLL) Tops Q1 Earnings, Raises '17 View
Defense contractor L3 Technologies, Inc. posted first-quarter 2017 earnings of $2.07 per share from continuing operations, beating the Zacks Consensus Estimate of $1.81 by 14.4%. Earnings however declined 0.5% from the year-ago figure of $2.08.
Total Revenue
Total revenue of $2.67 billion in the quarter surpassed the Zacks Consensus Estimate of $2.46 billion by 8.4%. Revenues were also up 13% year over year.
Organic sales to the U.S. government increased 13%, while that to international and commercial customers were up 8%. Overall, organic sales increased 11% in the first quarter.
L-3 Communications Holdings, Inc. Price, Consensus and EPS Surprise
L-3 Communications Holdings, Inc. Price, Consensus and EPS Surprise | L-3 Communications Holdings, Inc. Quote
Orders & Margin
Funded orders in the reported quarter were $2.62 billion, reflecting a 1% year-over-year rise. Funded backlog was $8.86 billion as of Mar 31, 2017, down 0.5% from $8.90 billion as of Dec 31, 2016.
Operating margin contracted 120 basis points (bps) to 9.5% in the first quarter.
Segmental Performance
Effective Mar 1, 2017, the company realigned its Electronic Systems. The Electronic Systems segment has been divided into two segments – Electronic Systems and Sensor Systems. Accordingly, the company’s structure comprises the following four segments:
Electronic Systems: Net sales at the segment increased 24.3% to $737 million from the prior-year figure of $593 million, mainly on account of significant organic sales growth.
Operating income was $91 million, compared to the year-ago number of $85 million, while operating margin contracted 200 bps to 12.3%.
Aerospace Systems: The segment recorded net sales of $1,045 million in the reported quarter, up 4%. The upside was driven by higher sales of Vertex Aerospace and ISR Systems.
Operating income dropped 34.9% to $69 million, while operating margin contracted 390 bps to 6.6%.
Communication Systems: Net sales at the segment improved 14% to $537 million, primarily due to increased volume and deliveries of secure networked communication systems to the U.S. Department of Defense (DoD) and deliveries of tactical communication terminals to the U.S. military.
Operating income declined 15.7% to $43 million and operating margin contracted 280 bps to 8%.
Sensor Systems: Net sales at the segment grew 23.2% to $350 million, primarily buoyed by organic sales growth.
Operating income rose 400% to $50 million and operating margin expanded 1,080 bps to 14.3%.
Financial Position
As of Mar 31, 2017, L3 Technologies had $230 million in cash and cash equivalents, compared with $363 million as of Dec 31, 2016.
Long-term debt as of Mar 31, 2017, was $3,326 million, compared with $3,325 million as of Dec 31, 2016.
Net cash from operating activities was $85 million at the end of the end of the first quarter, down 24.1% from the year-ago figure. Capital expenditure totaled $42 million, compared with $35 million in the prior year.
2017 Guidance
L3 Technologies has raised its 2017 outlook again. The company now expects earnings in the range of $8.50−$8.70 per share (versus the prior range of $8.40−$8.60) and revenues of $10,750−$10,950 million (the prior range being $10,625−$10,825 billion) for 2017.
However, the company continues to expect cash from operations of around $1,085 million and resultant free cash flow of $865 million.
Peer Earnings Review
General Dynamics Corporation (GD - Free Report) reported first-quarter 2017 earnings from continuing operations of $2.48 per share, beating the Zacks Consensus Estimate of $2.32 by 6.9%. Its first-quarter total revenue of $7,441 million missed the Zacks Consensus Estimate of $7,595 million by 2%.
Northrop Grumman Corporation (NOC - Free Report) reported first-quarter 2017 earnings of $3.63 per share, beating the Zacks Consensus Estimate of $2.90 by 25.2%. Its total revenue of $6.27 billion surpassed the Zacks Consensus Estimate of $6.12 billion by 2.5%.
Lockheed Martin Corp. (LMT - Free Report) reported first-quarter 2017 earnings from continuing operations of $3 per share, beating the Zacks Consensus Estimate by 8.7%. However, total revenue of $11.06 billion missed the Zacks Consensus Estimate by 1.8%.
Zacks Rank
L3 Technologies currently has a Zacks Rank #2 (Buy).You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>