Rating Change #8
L-3 Communications Holdings Inc
has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
Highlights from the ratings report include:
- The debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.34, which illustrates the ability to avoid short-term cash problems.
- LLL, with its decline in revenue, slightly underperformed the industry average of 3.7%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for L-3 COMMUNICATIONS HLDGS INC is currently extremely low, coming in at 14.90%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.80% trails that of the industry average.
- Net operating cash flow has declined marginally to $271.00 million or 9.36% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
L-3 Communications Holdings, Inc. provides command, control, communications, intelligence, surveillance, and reconnaissance (C3ISR) systems; aircraft modernization and maintenance; and government services in the United States and internationally. The company has a P/E ratio of 7.8, above the average aerospace/defense industry P/E ratio of 7.7 and below the S&P 500 P/E ratio of 17.7. L-3 has a market cap of $6.74 billion and is part of the
industry. Shares are up 3.9% year to date as of the close of trading on Tuesday.
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