Alliant Techsystems Inc.
) has entered into a Fixed Price Indefinite Delivery/Indefinite
Quantity ("IDIQ") agreement with the Department of Justice
("DOJ") and Federal Bureau of Investigation ("FBI") to deliver
.40 caliber ammunition. This contract has a customary one-year
base period, includes four one-year extension options and has a
maximum value of $75 million. Alliant's Sporting Group will be
responsible for this contract.
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Per the agreement, the company will provide duty and training
ammunitions to two federal bodies from its Speer facility in
Lewiston, Idaho. The supply is expected to start from December
The .40 caliber Speer's Gold Dot Duty ammunitions have
exceptional weight preservation and dependable feeding capacity
as well as excellent terminal performance. In addition, it offers
standard training ammunition and a reduced hazard option ("RHT").
The Speer RHT round has a frangible projectile, which dissolves
on contact. This ammunition is ideal for indoor-training
These bullets' proven track record enables it to become trusted
supplier of pistol ammunitions for several national as well as
international government agencies. Earlier, in March 2012,
Alliant received an IDIQ contract from the Department of Homeland
Security ("DHS") and the U.S. Immigration and Customs Enforcement
("ICE") to deliver .40 caliber ammunitions.
In the second quarter of fiscal 2013, Alliant's Sporting segment
reported sales of $275 million, up 11% year-over-year from $249
million. Rise in sales was primarily due to higher volume in both
the ammunition and accessories divisions.
We consider these types of small ticket-size contracts as
daily-finance-booster for Alliant and will enable the company to
further strengthen its ongoing strategic alliance with the
different government organizations.
However, we believe that the U.S. defense budget cutbacks could
limit the company's future growth prospects. In addition, a
higher degree of competition from a number of players in each of
its business segments is also a concern.
We expect the negatives to be partially eased by development in
Alliant's Aerospace segment, which in turn will contribute
considerably to its future profitability.
Considering positive and negative factors, we prefer Alliant
Techsystems to have a short-term Zacks #2 Rank (Buy rating). One
of its peers,
Rockwell Collins Inc.
), has short-term Zacks #3 Rank (Hold rating).
Arlington, Virginia-based Alliant Techsystems Inc. provides
aerospace and defense products to the U.S. government agencies.
The company also supplies ammunition and related accessories to
law enforcement agencies and commercial customers. With a market
capitalization of $2.03 billion, Alliant has 17,000 full time