Exelis Wins $127 Million Pentagon Communications Contract

The Department of Defense awarded McLean, Va.-based Exelis (NYSE: XLS  ) a maximum $127.2 million cost-plus-fixed-fee contract on Friday.

The Pentagon's contract announcement was short on details, but did confirm that the funds will be used for the operation, maintenance, and defense of Army communications systems in southwest and central Asia, including Kuwait, Afghanistan, Iraq, and Qatar.

The contract appears to involve primarily Exelis' Information and Technical Services division, which, while the larger of the company's two main business units, is the less profitable, generating $3 billion in revenues last year but producing operating profit margins of only 7%. (Exelis' C4ISR division, in contrast, while generating lesser revenues, earns operating profit margins more than twice those of the ITS unit.)

Profitability notwithstanding, the contract should help to stem analysts' expected decline in Exelis' profitability over the next five years: $127.2 million will be enough revenue to account for more than 2.4% of the company's annual revenues -- all from a single contract.


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