UPDATE: Bank Of America Upgrades L-3 Communications

In a note released Thursday, Bank of America analyst Ronald Epstein upgraded

L-3 CommunicationsLLL

from Underperform to Buy and raised the price objective from $117 to $146. Epstein wrote, "The most significant driver for the double upgrade is the change in our valuation methodology for LLL to DCF, which better captures LLL's capital deployment strategies and pension treatment as employed by defense pure plays." In reaction to L-3's acquisition of Data Tactics, Epstein has made the following adjustments.

2014 total sales increased by $50 million to $12,031 million.
Reduction in effective tax rate to 32.5 percent for 2014, based on a lower effective tax rate on foreign earnings.
2014 interest expense increased by ~$6 million to $182 million and outyear interest expense estimates by ~$10 million, based on the May 13, 2014 announcement to issue $1 billion in senior notes.
2014 EPS estimate from $8.45 to $8.50 compared to management guidance of $8.20-8.40.
EPS estimate for 2015 to 2018 decline by $0.05 per year.

Despite this "double upgrade," shares of L-3 were down just over one percent in the pre-market session.

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