Air Force Suspends L-3 Communications Holdings (LLL)

After the markets closed yesterday, L-3 Communications Holdings released an 8-K stating that its Special Support Programs Division (SSPD) has been suspended from receiving any new contracts from the U.S. government. This suspension follows an ongoing investigation into alleged misuse of an email system by L-3 employees. Jefferies analyst Howard Rubel said, "While the market is likely to harshly react to this uncertainty and the possibility of a fine, we are reluctant to cut our EPS estimates. The company has been cautious with its outlook and has been able to expand its business such as with the recent $250 million award from Equatorial Guinea for Anti-Piracy and Maritime Security. Our sense is that the shares have recently traded down to reflect concerns about the market for U.S defense products and services. An over-reaction in the near-term would knock the share price down by 4-5%." LLL is rated HOLD by Jefferies, with a price target of $85.00. LLL is currently trading at $79.16.

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