There are some definite perks to writing for The Motley Fool. You get to work with some high-quality people, and you get paid to learn more about the markets and the companies that make up the markets. And sometimes that whole process exposes you to some interesting perspectives and information.
Take the case of L-3 Communications (NYSE:LLL). Normally, I think of company conference calls as a pain in the rear. There's often a lot of chest-thumping and obfuscation and not a lot in the way of substantive discussion -- for which the analysts are just as much to blame with their "great quarter, guys" garbage.
Anyway, that's a long preamble for a somewhat tangential point -- the opening of L-3's call this quarter is well worth listening to. I'm not saying I agree with everything that L-3 had to say about the future of the U.S. military, but it was an interesting listen all the same.
Now, on to the meat of the quarter. Growth was once again solid. Reported revenue was up 48%, with organic growth of around 9% and organic growth in the defense business of nearly 11%. There was some margin compression, which the company blamed on the acquisition of Titan and stock option expense, but I also notice that R&D spending seemed a little on the low side.
I'm not a major fan of defense companies, but I am a big advocate of well-run, well-positioned companies trading below what I see as fair value. And that seems to be L-3 in a nutshell.
Sure, there are some quirks here. L-3 is both partner and competitor with companies like Boeing (NYSE:BA), Lockheed (NYSE:LMT), Raytheon (NYSE:RTN), and GeneralElectric (NYSE:GE), and that can make for some occasional strangeness. And budgets are never set in stone -- what might be a priority under one administration can quickly evaporate under a new one.
But I continue to have a hard time envisioning just how L-3 isn't going to continue to do well. I think just about everybody accepts the idea that more advanced communications, precision weaponry, and technologies like unmanned recon vehicles are the future, to say nothing of the need for increased spending on homeland security. L-3 is poised to serve those markets and is still trading below fair value. To this Fool, that makes it worth a serious look.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
