Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) has issued a profit warning for the fourth quarter of 2011, due to "the cessation of a program with a foreign customer," which will reduce its net profit by $60-65 million. The program in question is the sale of reconnaissance systems to Turkey at the order of the Israeli government.
In late December, the Ministry of Defense has ordered Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) and Elbit Systems to cancel the contract with the Turkish Air Force for the supply of airborne intelligence gathering systems. The contract was signed jointly with Elbit unit El-Op and IAI unit Elta in late 2009. Elbit's share of the agreement with the Turks is $87 million and IAI's $54 million. The systems were to have been supplied to the Turkish Air Force over four years. Defense sources said that the systems in question were among the most advanced of their kind.
Elbit Systems added that it is in talks with the Ministry of Defense over the company's claims for compensation due to the cessation of the program.
The analysts' consensus for Elbit Systems is non-GAAP earnings per share of $1.23 ($55 million) on $793.6 million revenue for the fourth quarter.
Clal Finance Brokerage analyst Tzahi Avraham said, "The reconnaissance equipment program for Turkey that the Ministry of Defense cancelled will hurt Elbit Systems' reputation. The impact will be felt in the company's global sales." He added, however, that the company would be able to sell the system to the IDF.
Elbit Systems' share price fell 0.3% on Friday on Nasdaq to $39.44, giving a market cap of $1.69 billion. Trading on the TASE will open late today, following the end of the general strike this morning.
Published by Globes [online], Israel business news - www.globes-online.com - on February 12, 2012
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