Initiating Coverage of L-3; We Expect Nice Margin Expansion, but Shares Slightly Overvalued
We’ve initiated coverage of defense contractor L-3 Communications with a narrow moat rating and fair value estimate of $139 per share. We like L-3’s revamped business portfolio and recent additions to its executive team. Our forecast calls for margin expansion thanks to a return to top-line growth combined with an improved portfolio and a renewed focus on operations. Our valuation model indicates that the shares are slightly overvalued at a price/fair value of 1.07. We arrive at this conclusion ...L3 Technologies is a defense technology company. The company's segments include: Intelligence, Surveillance and Reconnaissance systems, which provides engineering, modernization and sustainment solutions for military and various government aircraft, ground support equipment and other platforms; Communications and Networked Systems, which provides network and communication systems, communications products, radio frequency components, satellite communication terminals and space, microwave and telemetry products; and Electronic Systems, which provides a range of products and services, including components, products, subsystems, systems and related services to military and commercial customers.
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Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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