L-3 Communications [LLL] yesterday posted strong fourth quarter earnings due to the sale of a majority ownership in a business and higher profits in most of its business segments.
Net income increased 29 percent to $267 million, $2.21 earnings per share (EPS), from $207 million ($1.63 EPS) a year ago. Earnings were boosted by a $20 million (17 cents EPS) after-tax gain related to the divestiture. Excluding the gain from the sale, income from continuing operations was $247 million ($2.04 EPS), topping analysts’ expectations by 10 cents per share.
Sales in the quarter were up 5 percent to $4 billion from $3.8 billion a year ago, with 3 percent of the gain organic. Free cash flow was $287 million.
L-3’s profit growth, aside from the divestiture, came from the Government Services, Aircraft Modernization and Maintenance, and Specialized Products segments. Profits were down at the C3ISR segment due to growth in international airborne intelligence, surveillance and reconnaissance programs.
Sales increased at every segment except Government Services, which saw revenues decline on the shift away from a prime contractor to subcontract on a linguist contract.
For 2008, L-3 had $14.9 billion in sales, a 7 percent increase from the $14 billion in 2007. Net income rose 26 percent to $949 million ($7.72 EPS) from $756 million ($5.98 EPS).
L-3 revised downward its earnings guidance for 2009 by 18 cents EPS to between $7.12 and $7.32 due to higher estimated pension expenses. Sales are expected to be between $15.5 billion and $15.7 billion, $100 million higher on the low end of the projection.