Defense operator L-3 Communications Holdings Inc. (LLL - Free Report) won a task order from the GSA Federal Systems Integration and Management Center. The contract is worth $357 million and will run through 2018.
Specifically, the federal government has awarded the task order under the GSA Alliant vehicle to the company’s National Security Solutions (“NSS”) segment in support of the Reserve Component Automation (“RCA”) program. The deal calls for L-3 to perform software development, systems integration, distance learning and IT technical support services.
This RCA program is a mission-critical curriculum to update and maintain the automated information system for support of the Army Reserve and National Guard soldiers. The modernization and upgrade program will help maintain continuity in Army Reserve and National Guard daily operations.
L-3 Communications is a leading supplier of a broad range of products and services used in a number of aerospace and defense platforms. The company’s earnings as well as revenue during the second quarter easily surpassed the Zacks Consensus Estimate on the back of strong sales and international orders. With its varied businesses, L-3 Communications has managed to maintain a stable earnings flow.
The company’s NSS unit provides a full range of cyber security, intelligence, enterprise IT and security solutions services to the DoD, DoS, U.S. government intelligence agencies and global security customers.
However, with U.S. contract values gradually dwindling in the wake of defense budget uncertainties, strong orders from international customers have been a saving grace. Again, its NSS division’s net sales declined 1.3% from the year-ago level during the second quarter. The downtrend reflects lower demand for a technical support contract from a U.S. government agency due to sequestration funding reductions and less demand for U.S. Special Operations Command IT support services. These declines were partially offset by increased demand for intelligence and IT support services for the U.S. government and U.S. government agencies on existing contracts.
Hence, austerity in defense budget will likely continue to act as a deterrent to L-3 Communications’ broad growth objectives. The company presently carries a Zacks Rank #3 (Hold).
Other stocks in the defense domain currently performing well are Raytheon Co. (RTN - Free Report) , Northrop Grumman Corp. (NOC - Free Report) and Lockheed Martin Corp. (LMT - Free Report) , all with a Zacks Rank #2 (Buy).