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Analyst Blog

On Nov 18, 2013, we upgraded our recommendation on Alliant Techsystems Inc. (ATK - Analyst Report) to Outperform from Neutral. The company currently has a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

There are several catalysts, including Alliant’s strong performance in the second quarter of fiscal 2014, positive impacts from the acquisition of Caliber Company and the completion of the Bushnell acquisition on schedule, which led us to upgrade the stock.

In the second quarter of fiscal 2014, Alliant’s top as well as bottom line surpassed the Zacks Consensus Estimate on the back of robust contribution from its Sporting segment and a decrease in interest expenses.

We note that Alliant continues to strengthen product coverage under its Sporting segment as demand for sporting products are increasing in the U.S. Year to date, the company has completed two significant acquisitions.

In Jun 2013, Alliant acquired Caliber Company for $315 million. The acquired entity contributed $57 million to revenues in the reported quarter.

On Nov 4, 2013, the company completed the acquisition of Bushnell Group Holding Inc., a provider of branded sports optics, outdoor accessories, performance eyewear and affordable sports products for the sports enthusiast. Bushnell will be merged with Alliant’s Sporting segment.

We believe that a steady strategic acquisition plan will enable the company to strengthen its existing footprint besides providing operational and financial synergies.

Apart from the acquisition driven growth, Alliant is continuously winning government as well as non-government contracts. The company has a strong alliance with the U.S. and foreign defense establishments. During the second quarter of fiscal 2014, the company has received a contract, worth $102.4 million, from the U.S. Navy for the second full-rate production lot of the Advanced Anti-Radiation Guided Missile. We believe contract awards on regular intervals will enable the company to secure its future cash inflow stream.

Other Stocks to Consider

Other stocks in the industry that are currently performing well include Hexcel Corp. (HXL - Snapshot Report), Teledyne Technologies Inc. (TDY - Snapshot Report) and Lockheed Martin Corporation (LMT - Analyst Report), each with a Zacks Rank #2 (Buy).

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