L-3 Communications is expected to benefit from increased defense spending, as it is ranked among the top 10 biggest federal contractors. Also, higher security measures adopted by airports throughout the world will create new demand for L-3's baggage screening systems and surveillance programs. However, the company's revenue could be affected by the loss of key contracts in any of its business segments. Also, L-3's dependence on government spending and its strategy of growth through acquisitions could negatively affect results.
Parker-Hannifin (PH - Get Report), which makes motion and control technologies and systems, has been rated a buy since October 2006. The company's net income for the first quarter of fiscal 2008 rose by 9.0% to $229.60 million compared with the same period last year, bolstered by strong sales growth in its industrial international and aerospace segments. Diluted earnings per share, which accounted for the effect of the 3-shares-for-2 stock split completed on October 2007, increased 13.7% to $1.33 per share.
The company has been involved in a series of acquisitions, most recently of Rectus, a manufacturer of quick disconnect couplings and related products for pneumatic, hydraulic, medical and chemical processing applications. There are potential risks, however. Parker-Hannifin operates in a highly competitive environment, and its growth is partly dependent on the continued development of new products and technologies. A significant portion of the company's revenue comes from customers outside the U.S.; this leaves it vulnerable to adverse foreign policy and currency risk.