L-3 Communications [LLL] yesterday reported a drop in second quarter net income but its per share earnings rose as stock repurchases lowered the overall share count, which led to better than expected results.
Net income slipped 3 percent to $185 million, $2.03 earnings per share (EPS), from $191 million ($1.94 EPS), due to less favorable contract adjustments compared with a year ago and a change in sales mix toward lower margin work. The per share earnings topped analysts expectations by a dime as L-3, like other major defense contractors that have reported so far, lowered its stock count through its share buyback program.
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| L-3’s SPYDR Small Manned ISR Platform. Photo by L-3 |
Sales edged up 2 percent in the quarter to $3.2 billion from $3.1 billion with half of the growth organic. The growth was driven by its Platform & Logistics Solutions and C3ISR segments.
The company said that sales to commercial and international customers increased, accounting for 27 percent of overall sales versus 23 percent a year ago.
L-3 lowered its earnings and sales guidance for the year due to anticipated reduction stemming from the budget sequester, which was excluded in the prior outlook.
Earnings are now expected to be between $8.05 and $8.15 EPS versus the prior outlook of between $8.15 and $8.35. Sales are now expected to be between $12.5 billion and $12.6 billion versus prior guidance of between $12.6 billion and $12.8 billion.
Free cash flow through the first half of 2013 was $295 million. L-3 lowered its guidance slightly for free cash flow for the year but it still remains at just above $1 billion.
Funded backlog at the end of the quarter stood at $10.8 billion, down $72 million since the end of 2012.