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L3 Technologies (LLL) Beats on Q2 Earnings, Hikes '18 View

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L3 Technologies, Inc. reported second-quarter 2018 adjusted earnings of $2.47 per share from continuing operations, which surpassed the Zacks Consensus Estimate of $2.30 by 7.4%.

Excluding one-time items, the company reported GAAP earnings of $2.33, down 3% from the year-ago quarter’s figure of $2.39. 

Total Revenues

In the quarter under review, total revenues came in at $2.58 billion, outpacing the Zacks Consensus Estimate of $2.48 billion by 4.1%. The top line also improved 8.3% year over year.

Organic sales to the U.S. government rose 10%, while that to international and commercial customers improved 3%. Overall, organic sales were up 4%.

L3 Technologies Inc. Price, Consensus and EPS Surprise

L3 Technologies Inc. Price, Consensus and EPS Surprise | L3 Technologies Inc. Quote

Orders & Margin

Funded orders in second-quarter totaled $2.8 billion, reflecting a 32% rise compared with last year’s number. Funded backlog was $8.8 billion as of Jun 29, 2018, up 4% from $8.5 billion as of Jan 1, 2018.

Operating margin expanded 10 basis points (bps) to 12.4% in the reported quarter.

Segmental Performance

Electronic Systems: Net sales at the segment improved 6% to $812 million from the prior-year figure of $767 million driven by significant organic sales growth.

Operating income summed $113 million compared with the year-ago figure of $103 million. Also, operating margin expanded 50 bps to 13.9%.

Aerospace Systems: The segment recorded net sales of $741 million in the second quarter, up annually by 9%. The upside can be attributed to procurement of one U.S. Air Force (USAF) Compass Call Recap aircraft to begin missionization.

While operating income increased to $61 million from $56 million, operating margin remained flat at 8.3%.

Communication Systems: Net sales at the segment rose 1% to $554 million, courtesy of  higher volume on power devices for commercial and military satellites.

While operating income decreased 46% to $45 million, operating margin contracted 720 bps to 8.1%.

Sensor Systems: Net sales at the segment improved 22% to $476 million driven by higher organic sales.

Operating income improved 6% $54 million, while operating margin contracted 180 bps to 11.3%.

Financial Position

As of Jun 29, 2018, L3 Technologies had $1,366 million in cash and cash equivalents compared with $662 million as of Dec 31, 2017.

Long-term debt as of Jun 29, 2018, was $3,319 million compared with $3,330 million as of Dec 31, 2017.

Net cash flow from operating activities amounted to $178 million at the end of second-quarter 2018 compared with the year-ago quarter’s cash inflow of $315 million. Capital expenditures totaled $255 million which came in line with the year-ago quarter’s level.

2018 View

L3 Technologies raised its 2018 guidance. The company now expects adjusted earnings to be in the range of $9.80-$10.00 per share compared with $9.40-$9.60 guided earlier. Moreover, revenues are anticipated to be in the band of $10,000-$10,200 million compared with $9,850-$10,050 million projected previously.

Additionally, it raised the company’s expectation of 2018 cash from operations to $1,155 million from $1,170 million, while expectation for free cash flow was upped to $915 million from $900 million.

Zacks Rank

L3 Technologies currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Boeing (BA - Free Report) reported adjusted earnings of $3.33 per share in second-quarter 2018, beating the Zacks Consensus Estimate of $3.24 by 2.8%.

Lockheed Martin’s (LMT - Free Report) second-quarter 2018 adjusted earnings came in at $4.31 per share, outpacing the Zacks Consensus Estimate of $3.89 by 10.8%.

Textron (TXT - Free Report) reported second-quarter 2018 earnings from continuing operations of 87 cents per share, which surpassed the Zacks Consensus Estimate of 70 cents by 24.3%.

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