L-3 Communications Holdings Inc.’s (LLL) Display Systems unit has received a competitively-awarded firm-fixed price contract from Lockheed Martin Corporation (LMT). Per the contract, the company will develop a new 5-x-5-inch color Active Matrix Liquid Crystal Display (“AMLCD”) assembly for AH-64D Apache helicopter. The value of the contract was not disclosed.
The new color AMLCD assembly developed by L-3 Communications will replace the currently used monochromatic display unit. It has the capability to enhance Apache’s target acquisition and night vision sensor display. Additionally, it provides one of the highest resolution display systems available on U.S. military platforms that will enhance target detection and recognition for Apache pilots during day or night operations.
The Apache is a twin-engined army attack helicopter. The AH-64 Apache can climb at a rate of 889 m/min. The maximum and cruise speeds of the helicopter are 279 km/h and 260 km/h, respectively. The helicopter weighs around 5,165 kg, while the maximum take-off weight is 10,433 kg.
The AH-64 is designed to endure front-line environments and to operate during the day or night and in adverse weather using avionics, such as the Target Acquisition and Designation System, Pilot Night Vision System (TADS/PNVS), passive infrared countermeasures, Global Positioning System, and the Integrated Helmet and Display Sighting System. A newer system that is replacing TADS/PNVS is Arrowhead, manufactured by Lockheed Martin. Lockheed Martin is the largest defense contractor in the world. The company’s customer base includes the U.S. government, foreign governments, and other commercial buyers.
L-3 Communications, on its part, has extensive experience in supporting the Apache platform and has already delivered over 1,000 display systems to Lockheed Martin and the U.S. Army. L-3 is a leader in providing high-performance display systems, processing and avionics subsystem integration solutions for demanding environments. It has the ability to develop this complex system upgrade for warfighters and meet all program requirements on time and on budget. It also plans to provide its most advanced display technology for the Apache helicopter.
L-3 Communications is one of the best-positioned pure defense players based on its non-platform focus, broad diversification of programs and its focus on shareholder value. The company has opportunities for growth and profit expansion from the impending spin-off of its more uncertain Government Services businesses while retaining the more profitable Cyber, Intelligence and Security Solutions business wing.
However, negative offsets include the loss of key contracts, defense spending cuts and lack of near-term catalysts. Order growth and volume increases also remain dubious in this challenging environment. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
In July 2011, L-3 Communications reported second quarter 2011 diluted earnings per share of $2.15, comfortably surpassing the Zacks Consensus Estimate of $2.11 and year-ago quarterly earnings of $2.04 per share. Quarterly net sales fell by 5% year over year to $3.8 billion and also missed the Zacks Consensus Estimate by $73 million. The Zacks Consensus Estimates for third quarter 2011 and fiscal year 2011 are currently at $2.15 per share and $8.73 per share, respectively.
Headquartered in New York City, L-3 Communications is a prime contractor in Command, Control, Communications, Intelligence, Surveillance and Reconnaissance systems (C3ISR), aircraft modernization and maintenance, and government services.
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