Stock Spotlight: L-3 Communications Holdings
Command. Control. Communications. When it absolutely, positively has to be there – and be there classified – chances are L-3 Communications Holdings’ products or systems are doing the delivering.
That, plus the fact that L-3 Communications Holdings [LLL@LLL] has a Long Term PowerRating of 9 and belongs to an industry with an Industry PowerRating of 10, are what have made L-3 Communications the featured stock in our Stock Spotlight of the Week.
L-3 Communications Holdings is one of the largest defense contractors in the United States. The company specializes in the areas of intelligence, surveillance and reconnaissance (also referred to as ISR), and supplies a wide variety of sensors, scanners, propulsion systems, satellite communications and encryption products.
The company was recently in the news after having won a contract with NASA’s Johnson Space Center to provide space systems training for NASA engineers. L-3 will also be involved in redesigning the turrets on aircraft to make them compatible with new high-definition TV sensors. This contract with the Air Force is worth up to $34 million.
As a stock with a Long Term PowerRating of 9, L-3 Communications belongs to that class of stocks which, according to our research, have been both more reliable and better performers than the average stock. We found, for example, that 9-rated stocks have been higher one year later more than 79% of the time, compared to less than 68% of the time for the average stock.
In addition, stocks with Long Term PowerRatings of 9 have tended to outperform the average stock after a year. While the average stock tended to average between 12-13% after a year between 1995 and 2007, 9-rated stocks have tended to gain more than 18% over the same time period.
L-3 Communications has a P/E of 15.20 and a modest dividend yield of 1.30. In their last quarterly earnings announcement in April, LLL beat analyst estimates by $0.03.
I also mentioned that LLL comes from an industry group with a top PowerRating of 10. This industry group, Security and Protection Services, includes stocks like The Brink’s Company [BCO@BCO] with its Long Term PowerRating of 6 and Checkpoint Systems [CKP@CKP] with its Long Term PowerRating of 4.
Industry groups with PowerRatings of 10 have been the best performing industry groups since 1995. 10-rated industry groups have produced average annualized returns of more than 35% between 1995 and 2007, compared to just over 14% for the average industry group.
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David Penn is Senior Editor at PowerRatings.net.