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L3 Technologies (LLL) Q4 Earnings Top, Raises '18 EPS View

L3 Technologies, Inc. LLL posted fourth-quarter 2017 adjusted earnings of $2.35 per share from continuing operations, surpassing the Zacks Consensus Estimate of $2.30 by 2.2%.

The company reported earnings of $3.34 which was higher than the prior-year quarter’s equivalent of $2.32 per share. The improvement was led by a tax benefit of 99 cents on account of the recent U.S. tax reforms.

 

L-3 Technologies, Inc. Price, Consensus and EPS Surprise

 

L-3 Technologies, Inc. Price, Consensus and EPS Surprise | L-3 Technologies, Inc. Quote

 

Total Revenues

Total revenues of $2.57 billion in the quarter beat the Zacks Consensus Estimate of $2.55 billion by 1.1%. However, the top line was down 3% year over year.

Organic sales to the U.S. government inched up 0.4%, while that to international and commercial customers declined 12%. Overall, organic sales dropped 4%.

Orders & Margin

Funded orders in 2017 were $9.9 billion, reflecting a 5% rise compared to last year. Funded backlog was $9 billion as of Dec 31, 2017, up 6% from $8.4 billion as of Dec 31, 2016.

Operating margin contracted 50 basis points (bps) to 10.2% in the quarter.

Segmental Performance

Electronic Systems: Net sales at the segment declined 7% to $803 million from the prior-year figure of $861 million, mainly on account of significant organic sales decline.

Operating income was $110 million compared with the year-ago figure of $109 million, while operating margin expanded 100 bps to 13.7%.

Aerospace Systems: The segment recorded net sales of 727 million in the quarter, down annually by $1 million. The downside was attributed to lower volume for large ISR aircraft systems for foreign military customers.

While operating income increased to $58 million from $50 million, operating margin expanded 110 bps to 8%.

Communication Systems: Net sales at the segment improved about 3% to $602 million, primarily owing to increased volume and deliveries of secure networked communication systems to the U.S. Department of Defense.

While operating income dropped 16% to $47 million, operating margin contracted 180 bps to 7.8%.

Sensor Systems: Net sales at the segment declined 6% to $442 million on account of lower organic sales.

Operating income dropped 28% to $48 million and operating margin contracted 330 bps to 10.9%.

Financial Position

As of Dec 31, 2017 L3 Technologies had $662 million in cash and cash equivalents compared with $363 million as of Dec 31, 2016.

Long-term debt as of Dec 31, 2017, was $3,330 million compared with $3,325 million as of Dec 31, 2016.

Net cash from operating activities was $986 million at the end of 2017, down 3.5% from the year-ago figure. Capital expenditure totaled $224 million compared with $210 million in the prior year.

2018 Guidance

L3 Technologies raised its 2018 earnings outlook. The company now expects earnings in the range of $9.30-$9.50 per share (versus the prior range of $8.60-$8.85). Revenue guidance was reiterated at $9,850-$10,050 million.

The company also raised its expectation of cash from operations to $1,145 million from $1,110 million and resultant free cash flow to $900 million from $865 million.

Zacks Rank

L3 Technologies currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Peer Release

General Dynamics Corporation GD reported fourth-quarter 2017 earnings from continuing operations of $2.50 per share, beating the Zacks Consensus Estimate of $2.37 by 5.5%. However, its total revenues of $8,277 million missed the Zacks Consensus Estimate of $8,437 million by 1.9%.

Upcoming Peer Release

Huntington Ingalls Industries, Inc. HII is expected to report fourth-quarter 2017 results on Feb 15. The company has an Earnings ESP of +3.43% and a Zacks Rank #2 (Buy).

Lockheed Martin Corp. LMT is expected to report fourth-quarter 2017 results on Jan 29. The company has an Earnings ESP of +0.31% and a Zacks Rank #2.

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