L3 Technologies, Inc. provides aerospace systems, and a range of communication and electronic systems and products used on military and commercial platforms in the United States and internationally. The company operates in three segments: Electronic Systems, Aerospace Systems, and Communication Systems. It offers a range of products and services, including components, products, subsystems, and systems, as well as related services to military and commercial customers in business areas, including precision engagement and training, power and propulsion systems, aviation products and security systems, sensor systems, warrior systems, and optics, telescopes, and precision optical subsystems. The company also provides fleet management sustainment and support, such as procurement, systems integration, sensor development, modifications, and periodic depot maintenance for intelligence, surveillance, and reconnaissance, as well as special mission aircraft and airborne systems; strategic and tactical signals intelligence systems; secure data links; microwave products; secure terminal and communication network equipment and encryption management; and communication systems for surface and undersea vessels, and manned space flights. In addition, it offers modernization, upgrades and sustainment, maintenance, and logistics support services for military and government aircraft, and other platforms. Further, the company provides night vision and image intensification equipment, and security and detection systems. It serves the United States (U.S.) Department of Defense and its prime contractors, the U.S. Government intelligence agencies, the U.S. Department of Homeland Security, foreign governments, and domestic and international commercial customers. The company was formerly known as L-3 Communications Holdings, Inc. and changed its name to L3 Technologies, Inc. in December 2016. L3 Technologies, Inc. was founded in 1997 and is headquartered in New York, New York.
(Summary) (Company) (Chart)
15 January 2016
1yr Target $172.86
Payout Ratio 26.97%
1yr Cap Gain 16.09%
1yr Tot Return 17.97%
EPS (ttm) $10.38
EPS next yr $8.42
Forward P/E 17.68
EPS next 5yr 9.71%
1yr Price Support $81.75
Market Cap $11.51 Bil
Revenues $9.67 Bil
Earnings $815.00 Mil
Profit Margin 8.42%
Quick Ratio 1.30
Current Ratio 1.50
1yr RevGR -4.74%
3yr RevGR -7.16%
5yr RevGR -4.81%
1yr EarnGR ---
3yr EarnGR ---
5yr EarnGR ---
1yr DivGR 7.69%
3yr DivGR 8.28%
5yr DivGR 9.23%
L3 Technologies was originally formed as L-3 Communications in 1997 for the purpose of acquiring certain business segments from Lockheed Martin that had previously been part of Loral Corporation. L3 has continued to expand over the years through multiple mergers and acquisitions (see below) to become one of the top ten U.S. government contractors.
- Paramax Systems Corporation from Lockheed Martin. Loral had acquired Paramax in 1995
- Training & Simulation Division of Raytheon Systems Co., based in Arlington, Texas. This company was formerly known as Hughes Training, Inc., and part of the Hughes Aircraft Defense Group purchased by Raytheon from General Motors two years earlier. The division traces its ancestry to the original company formed by Edwin Link, inventor of the airplane simulator, and accordingly was renamed Link Simulation and Training.
- Raytheon Aircraft Integration Systems renamed L3 Integrated Systems
- SyColeman Corporation, which came about from the joining of Sy Technologies and Coleman Research Corporation.
- PerkinElmer Detection Systems from PerkinElmer which became L-3 Security & Detection Systems.
- Ship Analytics, Inc.
- Titan Corp., after a failed buyout attempt by Lockheed Martin.
- L-3 Communication Combat Propulsion Systems, previously owned by General Dynamics Land Systems.
- L-3 Communications MAPPS, previously CAE's Marine Controls unit
- Electron Dynamic Devices from Boeing Satellite Systems.
- Applied Signal & Image Technology, Linthicum Heights, MD. Geo-location systems for RF emitters.
- Advanced System Architectures, a company based in Fleet, Hampshire, United Kingdom. L-3 ASA has core capabilities in the development and through-life management of complex information systems, data fusion and tracking solutions, and interoperable secure communications systems.
- Crestview Aerospace, a company based in northwest Florida. Crestview Aerospace provides aircraft structures, major airframe assemblies, and military aircraft modifications for leading prime contractors and OEMs in the aerospace industry.
- Nautronix and MariPro, based in Fremantle, Australia and Santa Barbara, California, respectively, from Nautronix Plc in Aberdeen, Scotland. Nautronix and MariPro provide acoustic ranges and hydro-graphics to commercial and defense markets.
- TRL Technology, a specialist defense electronics company based in Gloucestershire, United Kingdom. TRL Technology is internationally known for development and innovation in the fields of interception, surveillance, electronic warfare, and communications.
- Insight Technologies, a company based in Londonderry, New Hampshire. Insight develops and builds optics, from night-vision goggles to weapon-mounted sights and lasers.
- Thales Training and Simulation (partial), a multinational company which manufactures civil and military full flight simulators and provides related training and support services - a wholly owned subsidiary of the Thales Group. In August 2012 L-3 acquired Thales Group's civil fixed-wing flight simulation business, to form L-3 Link Simulation & Training UK.
- CTC Aviation Limited, a company based in Southampton providing training and resourcing to many international airlines, most notably through its 'CTC Wings' ab-initio flight training program which successfully places many cadets within a vast network of partner airlines. As well as providing MPL courses for airlines such as Qatar Airlines, easyJet and Flybe, CTC Aviation also trains pilots on the British AirwaysFuture Pilot Program. The aviation academy has a 98% employment rate with various airlines including Ryanair, FlyBe and many more. CTC also has locations in Hamilton, New Zealand, Phoenix, Arizona and Gatwick Airport in London.
- MacDonald Humfrey (Automation), a Luton, UK based checkpoint security and automation company.
As of today, L3 Technologies is organized along 3 business segments in order to better serve their customers.
Electronic Systems Reportable Segment. In 2015, Electronic Systems had net sales of $4,269 million, representing 41% of our total net sales. The businesses in this reportable segment provide a broad range of products and services, including components, products, subsystems, systems and related services to military and commercial customers in several niche markets. Major products and services for this reportable segment include:
- Advanced Programs
- Aviation Products and Security
- Integrated Sensor Systems
- Power and Propulsion Systems
- Precision Engagement and Training
- Warrior Systems
Aerospace Systems Reportable Segment. In 2015, Aerospace Systems had net sales of $4,156 million, representing 40% of our total net sales. The businesses in this reportable segment provide products and services for the global ISR market, specializing in signals intelligence (SIGINT) and multi-intelligence platforms, to include full motion video, electro-optical, infrared, and synthetic aperture radars, along with other types of information gathering systems. These products and services provide the warfighter with the ability to collect and analyze data from command centers, communication nodes and air defense systems for real-time situational awareness and response. The businesses in this reportable segment provide select Command, Control and Communications (C3) systems products for military and other U.S. Government and select foreign government intelligence, reconnaissance and surveillance applications. We believe that these products and services are critical elements for a substantial number of major command, control and communication and intelligence gathering systems. The businesses in this reportable segment also provide modernization, upgrades and sustainment, maintenance and logistics support solutions for military and various government aircraft and other platforms. We sell these services primarily to the DoD and select foreign governments. Major products and services for this reportable segment include:
- Aircraft Systems
- ISR Systems
- Vertex Aerospace
Communication Systems Reportable Segment. In 2015, Communication Systems had net sales of $2,041 million, representing 19% of our total net sales. The businesses in this reportable segment provide network and communication systems, secure communications products, radio frequency components, satellite communication terminals, and space, microwave and telemetry products. These products are used to connect a variety of space, airborne, ground and sea-based communication systems and are used in the transmission, processing, recording, monitoring, and dissemination functions of these communication systems. Major products and services for this reportable segment include:
- Advanced Communications
- Broadband Communications
- Space and Power
- Tactical SATCOM
My Path Forward
There's no doubt that this is a company that's integral to the nation's national defense. There's also no doubt that this is a company that has grown through mergers and acquisitions. So it makes it a little difficult to analyze this type of company. Sales haven't been outstanding but the outgoing administration has been downsizing the nation's national defense for a number of years. The incoming administration appears to want to increase the size of our military and their equipment and that would be good for most defense companies like L3 Technologies.
The company is also not very cheap at this point. The recent pullback has helped but it would be nice to get an even better price (but that's the case with most companies!). But looking at the Dividend History Chart above makes a Dividend Growth Investor like myself salivate. That's just pretty to look at.
Debt could be a little lower but coverage of the debt is good and the company continues to make sufficient money to cover all its obligations. With a projected earnings growth rate near 10 percent and a dividend yield near 2% and growing in the upper single digits (well above the inflation rate), I see this as a very desirable investment. As such, this is probably the defense company I'd like to add to my portfolio.
In addition, from a technical point of view the stock chart is improving despite the recent pullback. I expect the shares of this company to continue to increase and this pullback simply offers an opportunity to accumulate these shares at a little better price.
I intend to start accumulating shares in this company in the next week or so, depending on the availability of funds. I'll also add to that position as prices make sense and I'll put the entire position on dividend reinvestment. I'd also like to add that I'll sell covered calls on this position but with the shares priced near $150 per share, that may be awhile before I'll be able to accumulate 100 shares.