Back to top

Analyst Blog

Zacks Equity Research

L-3 Acquires Simulation Business

LLL EGL

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

L-3 Communications Holdings Inc. (LLL - Analyst Report) has acquired Thales Training & Simulation Ltd’s civil aircraft simulation and training business, effective August 6, 2012. The company paid £83 million (approximately $130 million), funded with cash on hand.

Thales Training & Simulation is a leading manufacturer of commercial flight simulation equipment and had an installed base of more than 540 simulators and a significant global customer roster. Its advanced civil aircraft simulators conform to U.S. Federal Aviation Administration, European Aviation Safety Agency and International Civil Aviation Organization regulations.

Post-acquisition, the business will strengthen L-3’s Electronic Systems Group with its full flight simulator capability and help expand into the civil simulation market. The company will thus be able to offer a full range of total training system solutions to its military as well as commercial customers. This would not only expand the company’s global presence, but will diversify its product offering.

The business, which is now known as L-3 Link Simulation & Training U.K. Limited, will become a part of L-3’s existing Link Simulation & Training division, which is part of L-3’s Electronic Systems Group. The unit’s civil aircraft simulation solutions feature a suite of devices that meet every aspect of flight and maintenance crew training requirements.
 
In July 2012, L-3 Communications completed the spin-off of 100% of a new, independent, publicly traded government services company – Engility Holdings, Inc. (EGL - Snapshot Report) – to L-3 shareholders. We believe that L-3 Communications has ample opportunity for growth and profit expansion after the favorable conclusion to the spin-off of its Government Services businesses. The spin-off removed a lot of uncertainty with respect to revenue and will also take away some of the lowest margins at the company.

This was reflected in the company’s recently reported second quarter results with the top and bottom lines surpassing the corresponding Zacks Consensus Estimates with ease. Going forward, we expect the company to continue to post strong earnings based on its opportunities in growth areas, including Intelligence, Surveillance, and Reconnaissance, Electro-Optical/Infrared systems and cyber security.

Moreover, the company’s balanced business mix, improving operational efficiencies and focus on research and development allow it to pursue strategic opportunities in the commercial arena and in overseas markets.

Also, with the completion of the spin-off, the company will be able to focus more on core areas by providing market-leading, value-added products and solutions to its customers. In the long run, we expect the company to be one of the best-positioned pure defense players based on its broad diversification of programs and its focus on shareholder value. However, we remain concerned about the loss of key contracts, defense spending cuts and the lack of near-term catalysts.

The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

L-3 Communications Holdings operates through its wholly owned subsidiary, L-3 Communications Corporation. L-3 Communications is a leading supplier of a wide range of products and services used in a number of aerospace and defense platforms.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GROUP DXYN 15.84 +7.90%
BOFL HOLDING BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%