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DynCorp down 7.5%; Wachovia says L-3 Communications protest "may delay revenue" Print

18.12.07

BOSTON (Thomson Financial) - Shares of DynCorp International Inc. fell on heavy volume Tuesday after Wachovia Capital Markets said the recent protest on behalf of L-3 Communications Corp. in regards to the five-year, $4.6 billion contract awarded to DynCorp by the U.S. Army 'may delay revenue recognition.'

Shares of DynCorp, the Falls Church, Va.-based provider of maintenance and technical support services, fell 8.5% to $24.10 on volume of 408,000. The issue's 30-day average volume is 293,000.

Wachovia (nyse: WB - news - people ) recently increased its estimated and upgraded DynCorp to outperform in a note to clients on Dec. 10. The brokerage said it certainly appears that the U.S. Army wants DynCorp to win the contract, and while it believes the company will eventually prevail, L-3's protest may delay any revenue realized from the pact.

In a Wall Street Journal article published late Friday, the newspaper said L-3 is balancing the importance of the contract, which could boost the company's 2008 earnings by an estimated 15 cents a share or more, against potentially alienating a major customer that seems committed to picking a competitor to perform the work.

L-3 lost a contract to Global Linguistics Solutions LLC, in which DynCorp is the majority partner, back in December 2006. L-3 Communications (nyse: LLL - news - people ) protested the decision to the Government Accountability Office, and the Army reopened its deliberations and asked both companies for additional information in August, the Wall Street Journal said. In December, DynCorp said Global Linguistics was again awarded the contract, which L-3 has protested for a second time prior to the deadline for appealing the decision, which expires after Dec. 23.

L-3 officials did not discuss their reasons for filing the protest, the Wall Street Journal concluded.

Shares of L-3 Communications, the New York-based security and protection services provider, rose 0.6% to $108.03.

 
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