Aerospace and defense company Alliant Techsystems Inc. (ATK) announced operating earnings of $2.10 per share for its fourth-quarter fiscal 2011 ended March 31, 2011, which surpassed the Zacks Consensus Estimate of $1.93. Earnings in the quarter were lower than the year-ago figure by 34 cents.
The year-over-year decline in the quarterly earnings was due to an increase in pension expense, decline in sales volume on NASA programs, and strategic investments to support business pursuits.
Fiscal 2011 earnings at Alliant were $9.32 per share, which bettered the fiscal 2010 earnings by 28 cents and surpassed the Zacks Consensus Estimate of $9.15 per share.
Total Revenue
Alliant generated total revenue of $1.3 billion in the most recent quarter versus $1.25 billion recorded in the year-ago quarter, reflecting a growth of 4.2%.
The quarterly revenue of the company surpassed the Zacks Consensus Estimate of $1.22 billion.
Total revenue in fiscal 2011 was $4.84 billion, up 0.7% from $4.80 billion recorded in fiscal 2010.
Full year revenue was ahead of the Zacks Consensus Estimate of $4.76 billion.
Both fourth quarter and fiscal 2011 results were driven by better execution at the Armament Systems and Security and Sporting segments, while marginally offset by a slackened performance from Aerospace Systems and Missile Products.
Segmental Update
Fourth quarter fiscal 2011Aerospace Systems sales decreased 9.7% to $365.6 million from $404.9 million in the year-ago quarter. The decline in sales was due to lower revenues from the NASA programs.
Fiscal 2011 sales from this segment decreased 11.7% to $1.43 billion from $1.62 billion reported in fiscal 2010. The decline was attributable to the completion of the Space Shuttle Reusable Solid Rocket Motors program and lower revenues from the NASA programs.
Missile Products sales in fourth-quarter fiscal 2011 were $190 million versus $215.8 million recorded in the prior-year quarter. The decline of 11.8% year over year was due to lower sales on NASA’s launch abort system and special mission aircraft.
Segment sales in fiscal 2011 were $674 million versus $760.2 million recorded in fiscal 2010. The 11.4% year-over-year shortfall was due to lower sales on NASA’s launch abort system, missile defense systems, and special mission aircraft, with the only positive being the higher sales of defense electronics.
Armament Systems sales in fourth-quarter fiscal 2011 increased 10.4% year over year to $493.2 million. The improvement was driven by new sales generated by precision weapons programs and small-caliber ammunition, partially offset by lower modernization funds at the energetics systems business of the company.
Fiscal 2011 revenue from this segment increased 8.6% to $1.8 billion from $1.66 billion reported in fiscal 2010. The increase in revenue was attributable to higher sales of small-caliber ammunition and precision weapons.
Security and Sporting sales in fourth-quarter fiscal 2011 grew by 39.3% to $253 million, compared with $181 million in the prior-year quarter. The improvement was due to higher sales from the Blackhawk business and of commercial ammunition.
Segment sales in fiscal 2011 were $929.5 million versus $761.8 million recorded in fiscal 2010. The 22.0% year-over-year rise was due to higher sales from commercial ammunition and tactical accessories businesses, and $84 million of new sales from the acquired Blackhawk business.
Operational Update
The company experienced a steeper cost of sales in both fourth quarter and fiscal year 2011 compared with the prior-year periods. Consequently, gross profit of the company decreased 3.8% in the reported quarter and 2.9% in the fiscal year.
Alliant’s total operating expenses declined in the fourth quarter and fiscal year by 19.4% and 8.3%, respectively, on a year-over-year basis, reflecting the benefits from operational efficiency.
The growth in revenues coupled with the decline in operating expenses benefited the operating income of the company. In the fourth quarter 2011 operating income grew 20% to $131.9 million while for fiscal 2011 operating income edged up 2.6% to $525.7 million.
Financial Update
Total cash and cash equivalents as of March 31, 2011, were $702.3 million versus $393.9 million as of March 31, 2010.
Long-term debts of the company as of March 31, 2011 were $1.28 billion versus $1.38 billion as of March 31, 2010.
Cash from operating activities in fiscal 2011 was $421 million versus $193.7 million in fiscal 2010.
Alliant spent $130.2 million on capital expenditure in fiscal 2011, down 9.2% from the prior year.
Outlook
Alliant expects total revenue for fiscal 2012 in a band of $4.6 billion to $4.8 billion.
The company forecasts earnings per share of $8.00 to $8.60 for fiscal 2012.
Alliant pegs the average tax rate for the full year at 34%, while pension expense for fiscal 2012 is expected to be $135 million.
Cash flow from operating activities for fiscal 2012 is expected to range between $355 million and $380 million. Free cash flow for the full year is expected to come in between $225 million and $250 million after capital expenditures of $130 million.
Peer Comparison
Among the top Alliant competitors, General Dynamics Corporation (GD) announced operating earnings for the first quarter 2011 of $1.64 per share, beating the Zacks Consensus Estimate by 3 cents and also surpassing its year-ago results by 10 cents.
The operating revenue of the company in the first quarter 2011 was $7.8 billion, surpassing year-ago results by 0.6% and marginally below the Zacks Consensus Estimate of $7.9 billion.
Our View
The company completed fiscal 2011 on an encouraging note, surpassing our expectation for sales and earnings. The guidance provided by the company suggests that it will sustain its efficiency level in fiscal 2012 as well.
During the fiscal year the company benefited from its acquired Blackhawk business that added $84 million to total sales. We expect this business to prove beneficial in the year to come.
Alliant Techsystems currently retains a Zacks #3 Rank (short-term Hold rating).
Based in Minneapolis, Minnesota, Alliant Techsystems supplies aerospace and defense products to the United States government agencies. The company also supplies ammunition and related accessories to law enforcement agencies and commercial customers.
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