Alliant Techsystems Operations LLC, a subsidiary of premier aerospace and defense company Orbital ATK OA, along with Chemring Military Products, a subsidiary of the Chemring Group, has received a contract worth $750 million from the U.S. army. The contract covers the supply of non-standard ammunition and non-standard mortar weapon systems. Work is expected to be complete by Mar 27, 2021.
Interestingly, the Army is presently focused on a major force ramp-up in order to ensure swift supply of advanced ammunitions to the European Command (EUCOM) of the U.S. armed forces. As part of this plan, it has undertaken the replacement of its old M224 mortars with the new, improved and 20% lighter M224A1 model. As a result, the U.S. Defense Secretary has allocated a significant amount of military spending for Europe in 2016.
The global ammunition market is expected to grow sharply primarily due to a spike in transnational disputes and terrorism. The resulting increase in risks to national security and its impact on common people has led governments as well as the military to invest in and maintain an inventory of advanced warfare artillery.
We note that Orbital ATK has a significant presence in the defense and commercial aerospace markets. It is a pioneer in the fields of tactical missile propulsion, precision-guided munitions and advanced weapons. The company manufactures small- and medium-caliber ammunitions for the U.S. and the North-Atlantic Treaty Organization (NATO) forces.
Like other major defense players, Orbital ATK has been focused on strategies such as product developments, long-term contracts and business expansion to strengthen its position in the global ammunition market.
Orbital ATK’s varied product line enables it to clinch contracts at regular intervals from its customers. The company is quite optimistic about its performance in the coming year, supported by a sturdy backlog of $13.5 billion at the end of 2015. The backlog includes options, indefinite quantity contract and undefinitized orders.
Moreover, the company is expected to become a leading operator in the aerospace and defense markets, on the back of the perfect mix of Alliant Techsystems’ and Orbital Sciences Corporation’s diversified resources. Orbital ATK’s association with the U.S. government and international defense establishments as well as the strong alliance with the NASA will keep its order book ticking.
Zacks Rank & Key Picks
Orbital ATK currently has a Zacks Rank #3 (Hold). A few well-ranked stocks in the aerospace and defense industry include HEICO Corporation HEI, TransDigm Group Incorporated TDG and Spirit AeroSystems Holdings, Inc. SPR. While both HEICO and TransDigm Group sport a Zacks Rank #1 (Strong Buy), Spirit AeroSystems carries a Zacks Rank #2 (Buy).
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