L-3 Communications (LLL) Named Top Defense Pick at JPMorgan; Rating Upgraded to 'Overweight'
- Wall Street dips as telecoms slump; AmEx surges
- Microsoft (MSFT) Tops Q1 EPS by 8c
- AMD (AMD) Posts Q3 Operating EPS of 3c; Sees Q4 Revenue Down Sequentially
- AT&T (T) Said to Discuss Idea of Takeover in Time Warner (TWX) Meetings
- Alkermes plc (ALKS) Announces Third ALKS 5461 Phase 3 Met Primary Endpoint in MDD
Get access to the best calls on Wall Street with StreetInsider.com's Ratings Insider Elite. Get your Free Trial here.
(Updated - August 25, 2016 9:22 AM EDT)
JPMorgan upgraded L-3 Communications (NYSE: LLL) from Neutral to Overweight with a price target of $182.00 (from $158.00). Analyst Seth M. Seifman said the stock stands out for upside potential given FCF growth and a reasonable valuation. The stock is JPMorgan's top defense pick.
"The 5% FCF CAGR we project for LLL through 2020 is second best among our defense stocks and yet its ~13x multiple on 2017 FCF is lowest in the group," said Seifman.
"Moreover, LLL’s FCF yield of 7.8% on 2017 is low relative to the market (5.4%) and to other industrial stocks (typically ~6%). LLL’s ~130% cash conversion ratio makes it more expensive on P/E and so we only assume a FCF yield just above 7% for our target. Operationally, we assume 2% annual organic growth and 100+ bps of cumulative margin expansion through 2018 to a reasonable 11%+. Moreover, unlike LMT, NOC, and RTN, pension is a cash tailwind through decade-end. LLL’s turnaround is already underway and the stock has returned 25% YTD vs mid-teens appreciation for our other defense stocks. But with further FCF growth and a reasonable valuation we still see nice upside," added the analyst.
Shares of L-3 Communications closed at $146.78 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- UPDATE: Wells Fargo Upgrades Vail Resorts (MTN) to Outperform
- Wedbush Cuts Price Target on Tractor Supply (TSCO) to $65 Following 3Q
- BMO Capital Raises Price Target on Halliburton (HAL) Following 3Q Report
Create E-mail Alert Related CategoriesAnalyst Comments, Analyst PT Change, Hot Comments, Hot Upgrades, Upgrades
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!