L-3 Communications Holdings (LLL) Falls Further As It's Water-Logged And Getting Wetter

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified L-3 Communications Holdings ( LLL) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified L-3 Communications Holdings as such a stock due to the following factors:

  • LLL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $47.9 million.
  • LLL has traded 51,123 shares today.
  • LLL traded in a range 262.6% of the normal price range with a price range of $3.47.
  • LLL traded below its daily resistance level (quality: 175 days, meaning that the stock is crossing a resistance level set by the last 175 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on LLL:

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 stock currently has a dividend yield of 2%. LLL has a PE ratio of 14.3. Currently there are 5 analysts that rate L-3 Communications Holdings a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for L-3 Communications Holdings has been 841,900 shares per day over the past 30 days. L-3 has a market cap of $10.4 billion and is part of the industrial goods sector and aerospace/defense industry. The stock has a beta of 1.05 and a short float of 3.4% with 4.02 days to cover. Shares are up 11.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates L-3 Communications Holdings as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, LLL's share price has jumped by 31.75%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LLL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • L-3 COMMUNICATIONS HLDGS INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, L-3 COMMUNICATIONS HLDGS INC increased its bottom line by earning $8.54 versus $8.03 in the prior year. For the next year, the market is expecting a contraction of 1.6% in earnings ($8.41 versus $8.54).
  • LLL, with its decline in revenue, slightly underperformed the industry average of 0.6%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.60, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.23 is sturdy.

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