L3 Technologies (LLL) Up 2% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for L3 Technologies Inc. (NYSE:LLL) . Shares have added about 2% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to its next earnings release, or is LLL due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

L3 Technologies Q4 Earnings Top, Raises '18 EPS View

L3 Technologies posted fourth-quarter 2017 adjusted earnings of $2.35 per share from continuing operations, surpassing the Zacks Consensus Estimate of $2.30 by 2.2%.

The company reported earnings of $3.34 which was higher than the prior-year quarter’s equivalent of $2.32 per share. The improvement was led by a tax benefit of 99 cents on account of the recent U.S. tax reforms.

Total Revenues

Total revenues of $2.57 billion in the quarter beat the Zacks Consensus Estimate of $2.55 billion by 1.1%. However, the top line was down 3% year over year.

Organic sales to the U.S. government inched up 0.4%, while that to international and commercial customers declined 12%. Overall, organic sales dropped 4%.

Orders & Margin

Funded orders in 2017 were $9.9 billion, reflecting a 5% rise compared to last year. Funded backlog was $9 billion as of Dec 31, 2017, up 6% from $8.4 billion as of Dec 31, 2016.

Operating margin contracted 50 basis points (bps) to 10.2% in the quarter.

Segmental Performance

Electronic Systems: Net sales at the segment declined 7% to $803 million from the prior-year figure of $861 million, mainly on account of significant organic sales decline.

Operating income was $110 million compared with the year-ago figure of $109 million, while operating margin expanded 100 bps to 13.7%.

Aerospace Systems: The segment recorded net sales of 727 million in the quarter, down annually by $1 million. The downside was attributed to lower volume for large ISR aircraft systems for foreign military customers.

While operating income increased to $58 million from $50 million, operating margin expanded 110 bps to 8%.

Communication Systems: Net sales at the segment improved about 3% to $602 million, primarily owing to increased volume and deliveries of secure networked communication systems to the U.S. Department of Defense.

While operating income dropped 16% to $47 million, operating margin contracted 180 bps to 7.8%.

Sensor Systems: Net sales at the segment declined 6% to $442 million on account of lower organic sales.

Operating income dropped 28% to $48 million and operating margin contracted 330 bps to 10.9%.

Financial Position

As of Dec 31, 2017 L3 Technologies had $662 million in cash and cash equivalents compared with $363 million as of Dec 31, 2016.

Long-term debt as of Dec 31, 2017, was $3,330 million compared with $3,325 million as of Dec 31, 2016.

Net cash from operating activities was $986 million at the end of 2017, down 3.5% from the year-ago figure. Capital expenditure totaled $224 million compared with $210 million in the prior year.

2018 Guidance

L3 Technologies raised its 2018 earnings outlook. The company now expects earnings in the range of $9.30-$9.50 per share (versus the prior range of $8.60-$8.85). Revenue guidance was reiterated at $9,850-$10,050 million.

The company also raised its expectation of cash from operations to $1,145 million from $1,110 million and resultant free cash flow to $900 million from $865 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last month as none of them issued any earnings estimate revisions.

L3 Technologies Inc. Price and Consensus

L3 Technologies Inc. Price and Consensus | L3 Technologies Inc. Quote

VGM Scores

Currently, LLL has a subpar Growth Score of D. It lags a bit on the momentum front with an F. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

LLL has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.