L-3 Communications [LLL] this week introduced its financial guidance for 2008, saying its net earnings will grow faster than the company’s organic sales.
Earnings per share (EPS) in 2008 are expected to be between $6.41 and $6.55, representing about 10 percent growth over the company’s expectations for 2007. Organic sales are expected to grow by about 3 percent next year, down from about 8 percent forecast for 2007.
The guidance has upside if L-3 receives further extensions to its linguist contract with the United States military or wins the contract again. L-3 lost a recompete of the contract last fall but its protest of that decision was upheld, resulting in a series of extensions, the most recent lasting into December.
A win on the linguist contract could add between 15 cents and 20 cents EPS next year and 3 to 5 percent more of organic growth, estimates Credit Suisse defense analyst Robert Spingarn. The contract is one of the company’s largest and came as part of its acquisition of Titan Corp. a few years ago.
JP Morgan defense analyst Joseph Nadol says the 3 percent forecast for organic growth next year is better than he had expected, due to an increase in revenues related to the war in Iraq. Beyond 2008 though L-3’s sales could face “headwind” if the United States begins to withdraw military forces in Iraq, Nadol says.