Oppenheimer: Scrappy Margins Save Squirrelly Sales for L-3 Communications

According to a research report published today by Oppenheimer, L-3 Communications Holdings LLL had mixed 4Q11 results, widely missing top-line expectations but recovering the profit through better than expected margins. Oppenheimer explained, “On balance, the performance may help allay fears of a precipitous decline in LLL's fundamental performance. The other side of the coin though, is that even as the new fiscal environment began setting in over the course of 2011, LLL's ability to size and handicap its revenue pipeline appeared to deteriorate—causing the top-line misses to trend up through the year. Granted, this is primarily a reflection of LLL's short-cycle products and services, but it also suggests that more surprises may be lying in wait, especially in a year when budget cuts are set to begin biting in earnest.” Oppenheimer maintains its Underperform rating on L-3 Communications, which closed yesterday at $70.74.