By Lisa Beilfuss
Defense contractor L-3 Communications Holdings Inc.'s
first-quarter earnings dropped 38% as sales declined in each of its
four segments.
For the full year, the company expects sales of $11.45 billion
to $11.65 billion, down from its earlier estimate of $11.75 billion
to $11.95 billion. Excluding the impact of a planned divestiture of
its Marine Systems business, L-3 continues to project profit of
$7.35 to $7.65 a share this year.
Larger rivals Lockheed Martin and Northrop Grumman have
similarly reported drops in first-quarter profit, but those
companies lifted full-year earnings expectations.
The New York-based company supplies communications, intelligence
and surveillance systems and products for customers including the
Department of Defense, Department of Homeland Security and various
government intelligence agencies. General sales to the government
slid 10% from the year before, to $1.9 billion, driven by the U.S.
military drawdown in Afghanistan and U.S. Government budget
reductions.
Sales to international and commercial customers fell 4% to $814
million, driven by a decline in its Marine Systems segment on
account of the weaker euro against the dollar. The company expects
to complete the MSI divestiture in May.
"Our results for the quarter were below our expectations and
were negatively impacted by additional cost growth on international
head-of-state aircraft modification contracts in the Platform
Systems business of our Aerospace Systems segment," said Chief
Executive Michael Strianese.
Sales in the aerospace segment shrank 4.4% to $1 billion
Mr. Strianese said that to improve the sector's performance, the
company recently integrated the business into its ISR Systems
sector. "Additionally, we anticipate opportunities elsewhere in
Aerospace Systems later this year that will improve the segment's
results," he said.
Electronic systems sales fell 6.3%, communications systems
revenue dropped 13.5%, and national security solutions sales
plunged 20%.
In all, L-3 booked a profit of $105 million, or $1.25 a share,
down from $170 million, or $1.90 a share, a year earlier. Excluding
certain items, such as a loss related to an expected divestiture,
per-share profit fell to $1.43 from $1.90. Revenue decreased 8.3%
to $2.7 billion.
Analysts expected $1.54 in earnings a share and $2.8 billion in
revenue.
Shares in the company, down about 3% this year, were inactive
during premarket trading.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
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