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L3 Technologies (LLL) to Report Q2 Earnings: What to Expect?

L3 Technologies, Inc. LLL is scheduled to release second-quarter 2017 results on Jul 27, before the opening bell.

Last quarter, L3 Technologies delivered a positive earnings surprise of 14.36%. It is worth noting that the company surpassed the Zacks Consensus Estimate in all the trailing four quarters, with an average beat of 10.46%.

Let’s see how things are shaping up at the company prior to this announcement.

Factors at Play

Among the highlights of the second quarter, L-3 Technologies clinched multiple contracts for providing commercial aviation training, resourcing and simulation solutions in 2017. The deals were awarded by global commercial operators and airline partners. With a total value of more than $115 million, these contracts included delivery of airline pilot training programs, airline pilot resourcing, mid-level and classroom devices, and the sale of eight full flight simulators (FFS) to date this year.

Moreover, on the international frontier, the company continues to expand its footprint in key markets, particularly the Middle East and Asia, by adding resources and personnel to address opportunities and better serve its customers. We expect its result in the to-be-reported quarter to duly reflect such initiatives.

Overall for the second quarter, L3 Technologies expects sales to be roughly $2.7 billion, reflecting flat organic growth. Earnings per share is projected to lie in between $1.90-$2.00. Again, free cash outflow is anticipated in the range of 50 million–150 million. Moreover, management expects the company to witness higher margins of about 9%.

On the flip side, L3 Technologies has been witnessing weak performance in some of its product lines. The noteworthy aspect of this is the downward trend in margins for service-related work due to competitive pressure, which might be reflected in second-quarters’ results.

While the Zacks Consensus Estimate for earnings reflects 8.11% year-over-year growth, the consensus for revenues is pegged at $2.70 billion, implying a 1.47% year-over-year improvement.

Earnings Whispers

Our proven model does not conclusively show that L3 Technologies will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Zacks ESP: L3 Technologies has an Earnings ESP of -0.99%. This is because the Most Accurate estimate is pegged at $2.01, lower than the Zacks Consensus Estimate of $2.03. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: L3 Technologies carries a Zacks Rank #2, which increases the predictive power of ESP. However, the negative ESP makes surprise prediction difficult.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are a few stocks in the Aerospace and Defense space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:

FLIR Systems, Inc. FLIR is expected to report second-quarter 2017 results on Jul 26. The company has an Earnings ESP of +2.44% and a Zacks Rank #3.

Embraer SA ERJ is expected to report second-quarter 2017 results on Aug 3. The company has an Earnings ESP of +6.25% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Leidos Holdings, Inc. LDOS is scheduled to report second-quarter 2017 results on Aug 3. The company has an Earnings ESP of +1.30% and a Zacks Rank #3.

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Embraer-Empresa Brasileira de Aeronautica (ERJ): Free Stock Analysis Report
 
Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report
 
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