Aerospace and defense company Alliant Techsystems Inc. (ATK) announced operating earnings of $2.91 per share for its second-quarter fiscal 2011 ended October 3, 2010, which surpassed the Zacks Consensus Estimate of $2.81. The company bettered the year-ago result by an impressive 72 cents per share.
Total Revenue
Total revenue of Alliant increased marginally by 0.1% to $1,209.3 million from $1,207.9 million in the year-ago quarter.
The company experienced a year-over-over decline in two of its segments, while two other segments witnessed growth.
Aerospace Systems sales decreased 9.8% from the year-ago quarter to $376.4 million from $417.4 million. The decline in sales was due to lower sales on the Space Shuttle’s Reusable Solid Rocket Motor program as it completes its production run, partially offset by higher sales from the Ares I program.
Missile Products sales in second-quarter fiscal 2011 were $160 million versus $177 million recorded in the prior-year quarter. The 9.7% year-over-year decline was due to lower sales on NASA’s launch abort system and special mission aircraft.
Armament Systems sales in second-quarter fiscal 2011 increased 6.6% year over year to $443 million. The improvement was driven by new sales generated by precision weapons programs and additional volume on the non-standard ammunition contract, partially offset by lower sales volume in medium and large-caliber ammunition.
Security and Sporting sales in second-quarter fiscal 2011 grew by 16.3% to $231 million, compared with $198 million in the prior-year quarter. The improvement was due to higher sales from an acquired business and also reflected the company’s ability to meet demand for commercial ammunition with new capacity coming on line.
Operational Update
Total operating expenses of Alliant increased by 5.3% over the prior-year quarter, and so did operating expense as a percentage of total revenue. The year-over-year growth in expenses was mainly due to higher general and administrative expenses, which increased 24.8% from the year-earlier quarter.
The year-over-year rise in operating expenses affected the operating income of the company, which declined marginally by 0.4%. Alliant’s interest expenses increased 5% during the reported quarter to $20.4 million from $19.4 million in the year-ago quarter.
Financial Update
Total cash and cash equivalents as of October 3, 2010, were $265.7 million versus $224.9 million as of October 4, 2009.
Alliant spent approximately $18.2 million on capital expenditure in the quarter, down from $35 million in the prior-year quarter.
Outlook
Alliant maintains its total revenue guidance for fiscal 2011 in a band of $4.775 billion to $4.85 billion.
The company raised the earnings guidance for fiscal 2011 to $8.90–$9.10 per share from $8.50–$8.80 per share earlier.
Alliant pegs the average tax rate for the full year at 30%, while pension expense for fiscal 2011 is expected to be $130 million.
Free cash flow for the full year is expected to range between $275 million and $300 million and capital expenditure for the year is expected to be $120 million.
Our View
It is encouraging to see that the strong performance of the company during the first half of the year has allowed it to revise its earnings estimates for the fiscal year. We expect organic growth prospects and expense containment to play an important role in the second half of the fiscal year, helping the company to meet its growth targets.
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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