Yahoo Finance What Does L-3 Communications Expect in the Coming Year?
Despite Weak 2014 Results, L-3 Communications Is Poised for Growth (Part 8 of 10)
2015 outlook
For the fiscal year 2015, L-3 Communications (LLL) expects its key numbers to see minor declines. Many of the company’s competitors have also posted weak guidance. L-3 Communications expects its sales to decline by 2% year-over-year while EPS is also expected to fall by 1% year-over-year and will fall in the range of $7.35 to $7.65.
The company’s pension expense will increase in comparison to 2014 by $59 million due to a lower discount rate. The Afghanistan drawdown is expected to reduce sales by approximately $250 million. The company expects its US government business to decline by about 7% for the year, which will likely offset the 7% growth in its international and commercial business.
L-3 will continue to focus on providing value through innovative and affordable solutions for all of its customers. A part of that strategy has been and would continue to be reshaping its portfolio to reflect customers’ priorities and bring new efficiency to the core businesses.
The 2015 budget authorization, the Overseas Contingency Operations (or OCO) budget, and the growing GDP all point towards a bottoming out of the US defense industry downturn. The company is optimistic that the government will continue to give relief from sequestration cuts in the coming years, which would help gain stability in budget allocation and in turn improve the company’s business.
Other defense contractors that will also benefit from the industry improvement include Raytheon (RTN), Lockheed Martin (LMT), Northrop Grumman (NOC), Boeing (BA), and General Dynamics (GD). These companies form 1.82%, 2.88%, 1.83%, 5.28%, and 2.38% of the Industrial Select Sector SPDR (XLI), respectively.
Plan of action
L-3 expects to continue to execute its programs and further increase its international and commercial business to offset the downturn in the DOD (Department of Defense) business. The company will also continue to focus on creating value for shareholders through disciplined capital allocation and dividend strategy.
L-3 plans to invest about $20 million in research and development programs that will drive innovation. In addition, the company plans to strategically invest in new technologies that support DOD requirements and priority areas.
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