On Oct 10, 2013, we downgraded our recommendation on aerospace
and defense company,
Alliant Techsystems Inc.
), to Neutral from Outperform. The company currently has a Zacks
Rank #3 (Hold).
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Why the Downgrade?
We have downgraded our recommendation on the stock primarily due
to the negative impact from the current U.S. government shutdown,
the U.S. defense budget cutbacks, gradual withdrawal of troops
from Afghanistan and risks related to different program
These negative factors have also been reflected on the Zacks
Consensus Estimates. In the last 7 days, estimates for the
company's fiscal year 2014 earnings decreased by a penny to
$8.83. In addition, the company's expected sales growth is
Cause for Concern
Alliant Techsystems provides various kinds of products and
services to different U.S. defense establishments and the inflows
of contracts are a major source of its revenue. Due to the
current U.S. shutdown, the company's near-term performance might
The company generates a major chunk of its revenues from the U.S.
Department of Defense contracts. The ongoing cutback on the U.S.
defense budget is also a major cause of concern, which will
significantly impact Alliant Techsystems' upcoming order books.
Alliant Techsystems has a strong presence in the small caliber
ammunition market. However, the ongoing withdrawal of troops from
Afghanistan could lead to a decrease in demand for small caliber
ammunitions. Moreover, lower ammunition demand may discourage the
U.S. Department of Defense from placing new orders and renewing
the existing contracts with the company.
Other Stocks to Consider
Other stocks from the defense industry that are presently
performing well include
Elbit Systems Ltd.
) with a Zacks Rank #1 (Strong Buy), and
Esterline Technologies Corp.
), each with a Zacks Rank #2 (Buy).