Alliant Techsystems Inc. (ATK) received a three-year contract worth $77 million from the U.S. Army to develop and qualify the M829E4 120mm Advanced Kinetic Energy tactical tank ammunition.
Alliant Techsystems has already completed the first Engineering Manufacture Design (‘EMD’) phase. It was then selected for the second phase based on an industry competition that included the results of a ballistic demonstration test and shoot-off.
With the completion of the contract, Alliant Techsystems will end up with the second phase of the EMD work that is required to qualify the ammunition for use with the Army's M1A2 SEP Abrams Main Battle Tank. Once qualified, the ammunition will enter full-rate production.
The M829E4 is the Army's fifth generation, 120mm kinetic energy cartridge. Since 1980, Alliant Techsystems has delivered more than four million rounds of 120mm tactical and training tank ammunition to the U.S. Army, U.S. Marine Corps, and allied militaries.
Alliant Techsystems is a well diversified aerospace and defense contractor delivering products and solutions that are vital to the preservation of U.S. national security. We believe a combination of internal initiatives, recent acquisitions and international growth initiatives will have a positive influence on the company’s operating model. We further believe that the diverse mix of programs and broader exposure to the aerospace and defense markets will help the company to grow.
However, we are concerned over an overt dependence on the U.S. Government and NASA programs and their influential budgets, which may affect the company’s bottom and top lines. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock. In the near term, we would advise investors to accumulate its short-term Zacks #1 Rank (Strong Buy rating) peer TransDigm Group Incorporated (TDG).
Minneapolis, Minnesota-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 manufactures and sells a number of products including: ammunition, solid fuel propellant systems, fuzes, composites, missile defense products, and shooting and tactical accessories.
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