June 25, 2009 - Elbit Systems Ltd. (ESLT-NASDAQ) develops, manufactures, and integrates defense electronic and electro-optic systems primarily in Israel, the United States, and Europe. The company designs military aircraft and helicopter systems; helmet mounted systems; commercial aviation systems and aerostructures; unmanned air vehicle systems; naval systems; land vehicle systems; command, control, communications, computer, and intelligence (C4I) systems; electro-optic and counter measures systems; homeland security systems; electronic warfare (EW) and signal intelligence (SIGINT) systems; and various commercial activities.

Efficiency is what every investor seeks. Elbit Systems delivers efficiency. In the last 5 years while sales grew at an average annual rate of 18%, profits increased by 20%. For the next 5 years, sales are predicted to improve annually at a rate of 9% while earnings move ahead by 12%. As the company sells more products, it's making even more profits. That's what efficiency is all about.

Specifically, analysts see this year's earnings per share (eps) at $3.93. That's down from last year's $4.78, but last year saw a one time event (the sale of Elbit's interest in Mediguide) that netted $74 million. So those earnings last year were inflated by over $1.75 a share by the extraordinary item. Next year, look for $4.59 eps. For the first quarter, Elbit reported earnings of $1.02, up 36% compared to the same quarter last year. For the second quarter eps, analysts predict $1.07, up from 73 cents in the same period last year. For the third quarter, look for $1.11, well ahead of the 83 cents of the third quarter in 2008.

It's the unmanned air vehicle systems and intelligence surveillance that get the most attention and will drive earnings and sales for this year and next. The one caveat is the economic slowdown and its impact on tax revenues for governments, particularly in the U.S. where 30% of sales occur. That may cause a slowdown in military spending as budgets are cut to equate more closely with revenues.

More numbers: Market cap is $2.51 billion. Price to Book is 3.34. Book Value is $17.51. Operating margin was 10.38% in the last 12 months; Profit margin was 8.04%. Return on Equity is remarkable at 33.24%. Total cash is $268.76 million, putting cash per share at $6.38. Total Debt is $309.66 million. Current ratio is 1.245. There are 42.1 million shares outstanding with a float of 22.81 million. Insiders own 50% of the stock. Institutions have only 2.8%. There was a boost in the dividend of $1.10 a share for the second quarter. Dividends fluctuate quite a bit and seem correlated with earnings so it is difficult to determine an exact yield. Last year, there were 3 dividends of 38 cents in the second quarter, 20 cents in the third and 22 cents in the fourth.

Elbit Systems makes what most countries want: a way to bolster their defense. One product, the unmanned air vehicle systems, is getting more and more popular as it definitely saves lives. With an order backlog that is growing, the company seems to be in good shape for some time to come. That hasn't been lost on investors as the stock has advanced markedly in the last 3 months.

However, this isn't a slam dunk sure thing. If tax revenues continue to decrease, even governments won't have funds to buy everything they want. That would mean fewer orders for Elbit.

Company Web site: www.elbitsystems.com

- Ted Allrich