L-3 Communication Holdings Inc. Earnings: Margins Shrink as Costs Rise, Profit Falls

S&P 500 (NYSE:SPY) component L-3 Communication Holdings Inc. (NYSE:LLL) reported its results for the first quarter. L-3 Communications is a system contractor in aircraft modernization and maintenance, serving customers in commercial telecommunications and government.

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L-3 Communication Holdings Earnings Cheat Sheet for the First Quarter

Results: Net income for L-3 Communication Holdings Inc. fell to $201 million ($2.01 per share) vs. $204 million ($1.85 per share) a year earlier. This is a decline of 1.5% from the year-earlier quarter.

Revenue: Fell 0.4% to $3.59 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: L-3 Communication Holdings Inc. beat the mean analyst estimate of $1.88 per share. It beat the average revenue estimate of $3.46 billion.

Quoting Management: “Overall, given the challenging environment, we had a very solid first quarter, underscored by strong orders, sales and EPS,” said Michael T. Strianese, chairman, president and chief executive officer. “Orders grew 22% compared to last year, driven by several international new business wins and earlier than expected orders for several of our DoD and international contracts, resulting in a book-to-bill ratio of 1.14x. We ended the quarter with funded backlog of $11.4 billion.”

Key Stats:

The company has now topped analyst estimates for the last four quarters. It beat the mark by 13 cents in the fourth quarter of the last fiscal year, by 9 cents in the third quarter of the last fiscal year, and by 4 cents in the second quarter of the last fiscal year.

Gross margin went down 0.7 percentage point to 10.1%. The change appeared to be caused by costs, which went up 0.4% from the year-earlier quarter, while revenue fell 0.4%.

Revenue has fallen in the past four quarters. Revenue declined 5.6% to $4.01 billion in the fourth quarter of the last fiscal year. The figure fell 1.3% in the third quarter of the last fiscal year from the year earlier and dropped 5% in the second quarter of the last fiscal year from the year-ago quarter.

Net income has dropped 0.3% year-over-year on average across the last five quarters. Performance was hurt by a 7.7% decline in the first quarter of the last fiscal year from the year-earlier quarter.

Looking Forward: Over the past ninety days, the average estimate for the second quarter has fallen from $2.11 per share to $2.08, indicating that analysts are growing pessisimistic about the company’s performance next quarter. At $8.50 per share, the average estimate for the fiscal year has risen from $8.47 sixty days ago.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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