L-3 Communications Holdings Inc. (LLL) +3.33%
LLL agreed to buy Insight Technology Inc. to add night-vision goggles and thermal-imaging systems to its already diverse defense portfolio. The acquisition will be completed in the second quarter and will immediately add to operating results. Insight, which also makes laser aiming devices and laser rangefinders, is expected to have about $290 million in sales in 2010.
Just last week, LLL’s CEO Michael Strianese said the company had “plenty of dry powder” for acquisitions with about $1 billion in cash as well as access to credit. The purchase will be an all cash transaction, but the terms are yet to be disclosed.
LLL has a strong history of acquiring cutting-edge technology and his built a stable position in the defense industry thanks to its diversified product portfolio – LLL has about 2,000 contracts with no single contract accounting for more than 3% of total revenue.
The Pentagon’s budget is slated to increase by 3.4%, not including money for the wars in Iraq and Afghanistan. In particular, the Pentagon’s procurement budget is set for a 7.6% increase with command, control, and communications systems expected to see a boost. This will directly benefit firms like LLL and Harris Corporation (HRS).
WellPoint Inc. (WLP) -0.86%
WLP shares fell this week amid the company’s Congressional testimony over proposed premium increases in California. WLP said in a statement the pervious earnings forecast for 2010 is now subject to the “ability to secure and maintain sufficient premium rates.”
The health insurer has postponed premium increases of as much as 39% for two months so that California’s insurance commissioner could review the plan after it was heavily criticized by state officials and the Obama administration.
The recession and difficult labor market is leading younger, healthier individuals to forgo insurance, skewing the mix of policy holders toward the elderly. This dynamic and rising medical costs are the basis for WLP’s premium increases. Insurers were banking on federal legislation to help contain rising healthcare costs, but there is little choice but to raise rates since the healthcare bill has stalled.
Cerner (CERN) +3.00%
After a rough start to 2010, CERN has rebounded a bit in the past few weeks. Some of the bounce may be attributable to investors taking positions after the sell-off in January – the stock fell 8.22% for the month. CERN also reported earnings late last week that should a strong rebound in systems sales during the fourth quarter, which suggest the healthcare IT environment is improving.
Also lifting sentiment was various analyst upgrades for both CERN and fellow healthcare IT firm Quality Systems Inc. (QSII).
Additional content from this week:- Wal-Mart Stores (WMT) hurt by deflation and lower traffic
- Walgreen Co. (WAG) buys New York drugstore chain
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Peter J. Lazaroff, Investment Analyst
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