UPDATE: Oppenheimer Upgrades L-3 Communications Holdings to Perform as Valuation Reflects Headwinds

Oppenheimer raises its rating on L-3 Communications Holdings

from Underperform to Perform. Oppenheimer comments, "We had been Underperform on LLL for three reasons: its exposure to the Pentagon's Operations and Maintenance budget; its high percentage of services revenue (under severe growth and margin pressure); and the short-cycle nature of its products, which make it immediately sensitive to downward DoD budgetary pressures. While these headwinds are still materializing, LLL's current valuation (and 17% FCF yield) suggests that downside risk is now largely priced in. Moreover, with the pending spin-off of LLL's most vulnerable services segment, LLL's overall business mix no longer appears materially worse than that of most defense primes." LLL closed at $67.19 on Friday.