L3 Technologies, Inc. LLL is scheduled to release fourth-quarter 2016 results before the opening bell on Jan 26.
In the preceding quarter, L-3 Technologies posted a positive earnings surprise of 3.30%. It is worth noting that the company has outperformed the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 13.65%.
Let’s see how things are shaping up prior to this announcement.
Why a Likely Positive Surprise?
Our proven model shows that L-3 Technologies is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: L-3 Technologies has an Earnings ESP of +2.36%. That is because the Most Accurate estimate is $2.17 while the Zacks Consensus Estimate is pegged lower at $2.12. This is a meaningful and leading indicator of a likely positive earnings surprise.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: L-3 Technologies has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.
Meanwhile, we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Meanwhile, L-3 Technologies’ combination of a Zacks Rank #3 and +2.36% ESP makes us reasonably certain of an earnings beat.
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What’s Driving the Better-Than Expected Earnings?
L-3 Technologies’ recent initiatives have helped the company deliver solid results in new pursuits like defense and commercial aviation. These strategies also boosted the company’s legacy businesses which include unmanned systems equipment and secure communications such as ROVER and communication systems for Virginia-class submarines.
Among the highlights of the fourth quarter, L-3 Technologies completed the acquisition of Aerosim in a transaction that covers Burnsville, MN-based Aerosim Technologies, Inc. and Sanford, FL-based Aerosim Flight Academy, Inc. Aerosim will enhance L-3 CTS' pilot training capability for existing training operations in Phoenix, AZ, as well as the U.K., Thailand and New Zealand. The company also completed the buyout of Luton, U.K.-based MacDonald Humfrey (Automation) Ltd to expand its presence in the aviation security market.
As far as 2016 expectations for L-3 Technologies’ operating results are concerned, management has increased its sales estimates in the range of $10,250-$10,350 million, from the previous guidance of $10,150-$10,250 million issued during the third-quarter earnings call. The adjusted earnings per share outlook was raised to the range of $7.85–$7.95 per share from the earlier $7.65–$7.85.
On an overall basis, management is confident about responding to market opportunities and capitalizing on a steady demand environment, which should duly get reflected in the yet-to-be reported quarter’s numbers.
For the fourth quarter, the Zacks Consensus Estimate for earnings is pegged at $2.12 a share, reflecting a decrease of 1.68% year over year, while the consensus for revenues is $2.77 billion, implying a 3.46% year-over-year decline.
Price Movement
Shares of L3 Technologies gained 37.3% in the last 12 months, outperforming the Zacks categorized Electronics-Military Systems industry’s gain of 29.5%. The company witnessed a steady flow of contracts from the Pentagon, which has primarily driven its performance.