L-3 Communications Holdings ( LLL), a military-equipment company, has been rated a buy since August 2005. It recently reported that its second-quarter earnings nearly tripled over the same period last year. Higher defense spending worldwide, together with the company's recent acquisitions and a healthy backlog order book, encouraged management to raise guidance for fiscal 2007. 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 impacted 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.