Alliant Techsystems Inc. (ATK) reaffirmed its guidance for fiscal 2012 and provided its guidance for fiscal 2013.
2012 Guidance
Alliant maintains its earlier guidance for 2012. The company continues to forecast earnings of $7.65 -$7.75 per share in 2012 compared with $9.32 per share reported in fiscal 2011. The Zacks Consensus Estimate stands at $7.81 per share.
In fiscal 2012, the company expects revenue to be approximately $4.6 billion, flat with the Zacks Consensus Estimate. The company reported 2011 revenue of approximately $4.8 billion. The company takes into account lower margins and $33 million LUU flares accrual in the Security and Sporting group while estimating fiscal 2012 revenues.
Alliant expects its fiscal 2012 operating cash flow to be in the range of $355 million – $380 million. The company is likely to incur capital expenditure of approximately $130 million.
2013 Guidance
Alliant’s projected 2013 earnings range of $6.00 – $6.30 per share reflects a sharp decline from the 2012 level. Our earnings per share expectation for 2013, of $6.15 per share, lies at the midpoint of the company’s expected range.
2013 revenue is expected to be approximately $4.0 – $4.1 billion compared with $4.6 billion expected in 2012. The Zacks Consensus Estimate stands at $4.3 billion.
The company expects to generate operating cash flow in the range of $225 million – $250 million, considering an impact of pension contributions of approximately $160 million. Capital expenditure is expected to be approximately $100 million in fiscal 2013. The company also wants to implement a share repurchase program in the near term.
At the Peer
Alliant’s peer General Dynamics Corp. (GD) reported fourth quarter 2011 earnings from continuing operations of $2.20 per share, surpassing the Zacks Consensus Estimate of $2.00. Results also comfortably exceeded earnings of $1.91 per share in the year-ago quarter.
General Dynamics reported quarterly total revenue of $9.1 billion versus $8.6 billion in the year-ago quarter, reflecting growth of 6.3%. The quarterly revenue failed to meet the Zacks Consensus Estimate by $206 million.
Our View
We expect that the company’s decision pertaining to the modification of its reporting segments like Aerospace Group, the Defense Group, and the Sporting Group to be a positive. The revamping is aimed to increase competitive advantage and ensure long-term growth of the company.
The company also aims to diversify its advanced weapons and aircraft structure offerings with a plan to deliver modern, sophisticated, mission-critical and innovative products to its clients in the international and commercial arena. The company is well positioned with defense contracts and focuses on improving free cash flow. These will add value to shareholders wealth with distribution of continuous cash dividends.
But we are a bit worried about the continued demand for lower-priced and lower-margin ammunition products in the Security and Sporting group, lower sales volume related to loss at the Radford Army Ammunition Plant, challenges from NASA and limited military ammunition orders due to US defense budget cutback and higher pension expenses.
The market is a touch disappointed with the guidance provided by the company. This is reflected in the trading results of the shares, which declined significantly by 21.6% to $54.03 in the last year.
We presently retain a short-term Zacks #4 Rank on the stock, which translates into a Sell 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.
To read this article on Zacks.com click here.
Zacks Investment Research
