Alliant Techsystems Inc.
(
ATK
) has entered into an Indefinite Delivery/Indefinite Quantity
("IDIQ") contract worth $266 million with the U.S. Army. Per the
contract, the company will supply small caliber ammunition,
including 5.56mm, 7.62mm and .50-caliber cartridges.
This ammunition will be manufactured in Alliant's Lake City Army
Ammunition Plant in Independence, Missouri. The U.S. Army and the
company have jointly invested $276 million in the modernization of
the facility. As a result, the company has already been able to
scale up the new 5.56mm cartridge production under the Enhanced
Performance Round as known to the U.S. Defense.
Alliant plays a significant role to meet the U.S. Army's demand
for the small caliber ammunition. In the past twelve years, the
company supplied 11 billion rounds of bullets to the armed forces.
In May last year, the company received a similar IDIQ contract from
the U.S. Army, with a deal value of $488 million.
Alliant is slated to release its fourth quarter and fiscal 2012
numbers on May 3, 2012. The Zacks Consensus Estimates for the
fourth quarter and fiscal 2012 is currently $1.70 per share and
$7.77 per share, respectively.
The company is well positioned with defense contracts. It is
focused on improving and revamping the Aerospace Group, the Defense
Group and the Sporting Group. We believe that these initiatives
will ensure long-term top and bottom-line growth for the company
and increase free cash flow. These will add value to shareholders
through distribution of continuous cash dividends.
But, we are concerned about limited military ammunition orders
due to U.S. defense budget cutbacks, continued demand for
lower-priced and lower-margin ammunition products in the Security
and Sporting Group, higher pension expenses, and lower sales volume
related to loss at the Radford Army Ammunition Plant. We currently
retain a Zacks #3 Rank on the stock, which translates into a
short-term Hold rating.
Arlington, Virginia-based Alliant Techsystems Inc. is a premier
aerospace and defense company supplying products to 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
Astronics Corporation
(
ATRO
) and
Hexcel Corporation
(
HXL
).
ALLIANT TECHSYS (
ATK
): Free Stock Analysis Report
ASTRONICS CORP (
ATRO
): Free Stock Analysis Report
HEXCEL CORP (
HXL
): Free Stock Analysis Report
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