A Key Business Overview of L-3 Communications



What the company does

L-3 Communications Holdings (LLL) provides ISR systems, aircraft sustainment, aircraft modernization and maintenance, simulation, night vision equipment, government services, as well as command, control, communications, and national security solutions. The company also provides electronic systems for military and commercial platforms. L-3 is considered to be one of the top ten defense contractors in the world.

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L-3 Communications’ prime customers included the US Department of Defense, NASA, US Government intelligence agencies, Department of Homeland Security, aerospace contractors, and commercial telecommunications and wireless customers. However, after the defense budget cuts, the company has tried to make its place in the international markets too.

Key attributes

The company has a broad and diverse portfolio of technologies and contracts, so it does not depend on the success of a few contracts. The company has a growing international and commercial presence, as the diagram above shows. The company has a very flexible cost structure and an efficient capital structure. It also has a high earnings-to-cash flow conversion ratio.

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The company aims to strengthen its market position by gaining market share. It has been working towards bettering its EPS and generates robust cash flows every year. The company aims at building and strengthening its customer relationships and provides them with innovative and affordable solutions. It is also dedicated to creating shareholder value.

Business segments and competitors

The company operates in four business segments: Aerospace Systems, Electronic Systems, Communications Systems, and National Security Council. The first two of these segments lead the revenues.

The company faces competition from other defense majors such as Northrop Grumman Corporation (NOC), Lockheed Martin (LMT), Raytheon Company (RTN), and Textron (TXT), to name a few. RTN, LMT, and NOC form 1.82%, 2.88%, and 1.83% of the Industrial Select Sector SPDR (XLI), respectively.

Next we’ll look at the company’s performance in the fourth quarter.


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