Alliant Enters $36M Ammo Deal - Analyst Blog

By Zacks Equity Research,

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Alliant Techsystems Inc. ( ATK ) has received a contract, worth $36 million, from the U.S. Army to provide 120mm training ammunitions for M1A1/A2 Abrams main battle tanks. This contract award has a customary one-year base period and four one-year extension options.

Alliant's 120mm cartridges are 982mm in length and weigh 22.3 kg. The ammunition is used for M1A1/A2 Abrams main battle tanks and comprises M865 kinetic energy and the M1002 multi-purpose anti-tank training rounds.

These training rounds have been designed in a way that it closely resembles tactical ammunition in terms of its appearance and ballistic performance, thus providing warfighters realistic training experience. The 120mm tank ammunition delivers training rounds that ensure greater safety, reliability and performance.

This training ammunition will be manufactured at the Allegany Ballistics Laboratory ("ABL") facility in Rocket Center, West Virginia. The U.S. Navy owned ABL is operated by Alliant and provides advanced manufacturing technologies for advanced material structures, advanced electronic fuzing and integration, conventional munitions assemblies, and solid rocket motor propulsion. 

Alliant plays a significant role in meeting the U.S. defense establishment's demand for 120mm training ammunition. To date, the company has supplied 4 million rounds of this ammunition to the U.S. armed forces and allied rangers.

We believe Alliant's decision to realign its reporting segments into three business units will enable the company to become more competitive, by increasing operational efficiency, ensuring long-term top and bottom-line growth, and contributing to free cash flow. Subsequently, these will add value to shareholders wealth with distribution of continuous cash dividends.

But, we are concerned about limited military ammunition orders due to U.S. defense budget cutbacks, continued demand for non-standard weapons program, small caliber ammunitions and medium caliber guns, and higher pension expenses. Alliant Techsystems Inc. currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Arlington, Virginia-based Alliant Techsystems Inc. is a premier aerospace and defense company supplying products to the U.S. government agencies, and its prime contractors and sub-contractors. The company also supplies ammunition and related accessories to law enforcement agencies and commercial customers. Alliant Techsystems peers include Raytheon Company ( RTN ) and Northrop Grumman Corporation ( NOC ).

ALLIANT TECHSYS (ATK): Free Stock Analysis Report
NORTHROP GRUMMN (NOC): Free Stock Analysis Report
RAYTHEON CO (RTN): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: ATK , NOC , RTN

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