Alliant Techsystems Inc. (ATK) reported fiscal first quarter 2012 adjusted earnings of $2.02 per share, pushing ahead of the Zacks Consensus Estimate of $1.98. Results were however, lower than the year-ago earnings of $2.24.
Cost containment measures coupled with focus on efficiency improvements led to the better-than-expected numbers in the quarter. Including 11 cents tax benefit, the company reported earnings of $72 million or $2.13 per share, compared with $75 million or $2.24 per share in fiscal first quarter 2011.
Operational Update
Total sales in the fiscal first quarter declined 10.6% year over year to gross $1.1 billion. Lower sales on NASA's human space flight programs, coupled with lower sales of non-standard ammunition and lower sales at the Radford Army Ammunition Plant induced the overall sales decline.
Operating expense in the quarter declined 3.8% year over year to $114.7 million attributable to lower research and development, selling and general and administrative expenses.
Operating income totaled $130.5 million, down by 1.9% year over year.
Segment Update
Aerospace Systems: Segment sales declined 4% year over year to $354 million in the quarter. Lower revenue on NASA programs, partially offset by higher sales of commercial aircraft structures and flares/decoys contributed to the decline.
Operating income was $42.5 million; increasing 19% over the prior-year quarter on the back of a gain from the sale of a non-essential parcel of land to the State of Utah, profit generated by higher sales volumes of flares and decoys and improving operating efficiencies. However, these positives have been somewhat muted by lower sales on the group's NASA human space flight programs.
Armament Systems: Segment sales totaled $347 million, down 21% over the prior-year quarter due to lower non-standard ammunition and weapons sales as well as lower sales at the group's Radford, Virginia facility.
Operating profit of $47.8 million declined 4% over the prior-year quarter attributable to lower sales volume, partially offset by improving operating efficiencies.
Missile Products: Segment sales of $145 million reflects a 7% decline over the year-ago quarter due to lower sales volume in defense electronics.
Operating income increased 3.4% year over year to $17.1 million on the heels of improving operating efficiencies and a higher profit rate on tactical rocket motor programs.
Security and Sporting: Segment sale declined 4% year over year to gross $229 million.
Operating profit declined 11% to $29 million due to lower sales volume in commercial ammunition products and higher raw material costs.
Financial Update
Alliant ended the quarter with cash and cash equivalents of $406 million, down from $702 million at fiscal 2011-end.
Long-term debt at quarter-end was $1.29 billion, flat with fiscal 2011-end.
Cash used in operating activities in fiscal first quarter was $151.5 million, compared with $91.8 million used in the year-ago quarter.
Alliant spent $41.6 million on capital expenditure in the quarter, higher than $35 million in the prior-year quarter.
Free cash outflow in the quarter was $193 million, compared with outflow of $127 million in the year ago quarter.
Looking Ahead
Alliant projects fiscal 2012 sales in the band of $4.6 to $4.8 billion.
The company now expects to deliver earnings between $8.50 to $9.00 per share, higher than the previous guidance of $8.00 to $8.60 per share.
Cash provided by operating activities is estimated in a range of $355 to $380 million in 2012. Capital expenditure is expected to be $130 million, resulting in free cash flow between $225 million – $250 million.
Peer Comparison
General Dynamics Corp. (GD), which competes with Alliant, reported second quarter earnings from continuing operations of $1.79 per share, surpassing the Zacks Consensus Estimate of $1.73. Results also comfortably beat earnings of $1.68 in the year-ago quarter. Performance of the company was affected by receding revenues across business segments. This was partially salvaged by lower costs.
Raytheon Co. (RTN), another peer of Alliant, reported second-quarter 2011 operating earnings of $1.39 per share, beating the Zacks Consensus Estimate of $1.16. Results also were higher than the year-ago quarterly earnings of $1.34 per share.
Our Take
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 grow. Concerns over budget cuts of the U.S. Government and NASA remain.
We continue to retain our long-term Neutral stance on Alliant. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.
ALLIANT TECHSYS (ATK): Free Stock Analysis Report
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