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Alliant Techsystems Inc. (ATK - Analyst Report) reported second quarter fiscal 2014 pro forma earnings of $2.82 per share, up 50.0% from the year-ago period. Lower interest expense and solid performance by the Sporting business led to the upswing in earnings.

Quarterly earnings also outpaced the Zacks Consensus Estimate of $2.37 by 18.9%.

GAAP earnings per share were $2.86 compared with $2.00 per share in the prior-year quarter. The difference between pro forma and GAAP earnings was due to a one-time impact of 4 cents coming from inventory step-up and tax law changes.

Total Revenue

Alliant's total revenue in the second quarter fiscal 2014 was $1,142.4 million, surpassing the Zacks Consensus Estimate by 2.2%. Reported revenue also exceeded the year-ago figure by 6.8%.

Revenue increased on the back of Aerospace and Defense and Sporting Group sales, partially offset by a decline in contribution from Defense Group.

Segmental Update

Aerospace Group: Sales from this segment in the quarter increased 1% to $319 million from the prior-year quarter. The year-over-year increase reflects increased sales in the Space Components and Space Systems Operations divisions.

Defense Group: This segment reported sales of $472.0 million, down 9% year over year due to a sales decline at the Small Caliber Systems, partially offset by increasing sales in the Missile Products division.

Sporting Group: This segment registered a 48% increase in sales to $421 million from the prior-year quarter. The increase in sales was driven by higher volume in ammunition, sales from Savage of $57 million, and a previously announced ammunition price increase.

Corporate and Other: Corporate and other expenses totaled $5 million compared with $16 million in the prior-year quarter, reflecting lower pension expense, partially offset by transaction costs related to acquisitions.

Operational Highlights

Alliant’s cost of sales was $874.9 million, up 3.9% from the year-ago quarter. Gross profit moved up to $267.4 million from $228.3 million registered in the prior-year period.

Interest expenses totaled $15.2 million, down 16% year over year mainly due to the declining debt level.

Financial Update

Cash and cash equivalents as of Sep 29, 2013, were $112.9 million versus $417.3 million as of Mar 31, 2013.

Long-term debt as of Sep 29, 2013, was $0.82 billion versus $1.02 billion as of Mar 31, 2013.

Cash provided by (used in) operating activities in the first six months of fiscal 2014, was $42.5 million versus ($32.8) million in the comparable year-ago period.

Alliant’s capital expenditure was $52.3 million at the end of the first six months of fiscal 2014 versus $40.2 million in the comparable period of the previous year.

The company repurchased shares worth $24 million in the second quarter of fiscal 2014, taking the total tally to $108 million since the Board of Directors established the two-year repurchase program.

Guidance

Alliant increased its sales forecast for fiscal 2014 to the range of $4.68–$4.73 billion from the previous guidance of $4.30–$4.38 billion, taking into consideration its strong operating performance and contribution from the Bushnell acquisition.

Alliant’s fiscal 2014 earnings expectation is now $9.10 to $9.40, up from its previous guidance of $8.60 to $9.00, on the back of a higher top line.

Alliant expects full-year fiscal 2014 free cash flow in the range of $210 million to $230 million, up from the previous guidance of $200 million to $225 million.

Other Company Releases

Lockheed Martin Corporation (LMT - Analyst Report) posted third-quarter 2013 operating earnings of $2.57 per share, which surpassed of the Zacks Consensus Estimate of $2.26 by 13.7%.

Raytheon Company (RTN - Analyst Report) reported third-quarter adjusted earnings of $1.51 per share, beating the Zacks Consensus Estimate of $1.33 by 13.5%.

General Dynamics Corporation (GD - Analyst Report) reported third quarter earnings of $1.84 per share, exceeding the Zacks Consensus Estimate of $1.68 by 9.5%.

Our View

Alliant Techsystems yet again delivered a positive earnings surprise. The contribution from its Bushnell acquisition is going to further boost performance.

Even though the company continues to perform well, uncertainties related to federal budget cutbacks could constrain its future prospects.

Alliant Techsystems currently has a Zacks Rank #2 (Buy).

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