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Orbital ATK (OA) Q3 Earnings: What's in Store for the Stock?
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Orbital ATK, Inc. is expected to release third-quarter 2016 financial results before the market opens on Oct 25. Last quarter, this independent aerospace/defense equipment operator reported a positive earnings surprise of 3.85%. Let’s see how things are shaping up prior to this announcement.
Earnings Whispers
Our proven model does not conclusively show that Orbital ATK is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here, as you will see below.
Zacks ESP:Orbital ATK has an Earnings ESP of 0.00%. This is because the Most Accurate estimate stands in line with the Zacks Consensus Estimate of $1.39.
Zacks Rank:Orbital ATK has a Zacks Rank #4 (Sell). As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement.
In 2012, Orbital ATK was awarded a contract for the production of U.S. military small-caliber ammunition worth $2.3 billion. However, the company had been incurring losses on the contract since 2014. An error in accounting was located after intense review and was therefore judged as a loss contract in 2016. Recognition of the loss-contract had led to a restatement of accounts for fiscal 2015. This restatement will continue to hurt free cash flow to the tune of $25–$30 million in 2016 and beyond.
Orbital ATK requires a variety of raw materials such as steel, zinc, aluminum, natural and synthetic rubber compounds, acrylonitrile, ammonium perchlorate and other substances for manufacturing end products. Rising prices of raw materials, disruptions in the supply chain and delayed replacement or addition of suppliers tend to hurt the company’s results.
Stocks to Consider
Here are some companies in the aerospace/defense industry worth considering on the basis of our model, which shows that it has the right combination of elements to post an earnings beat this quarter.
Triumph Group, Inc. (TGI - Free Report) has an Earnings ESP of +7.97% and a Zacks Rank #3. The company is slated to announce third-quarter 2016 earnings on Nov 3.
General Dynamics Corporation (GD - Free Report) has an Earnings ESP of +0.84% and a Zacks Rank #3. The company is slated to announce third-quarter 2016 earnings on Oct 26.
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Orbital ATK (OA) Q3 Earnings: What's in Store for the Stock?
Orbital ATK, Inc. is expected to release third-quarter 2016 financial results before the market opens on Oct 25. Last quarter, this independent aerospace/defense equipment operator reported a positive earnings surprise of 3.85%. Let’s see how things are shaping up prior to this announcement.
Earnings Whispers
Our proven model does not conclusively show that Orbital ATK is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here, as you will see below.
Zacks ESP:Orbital ATK has an Earnings ESP of 0.00%. This is because the Most Accurate estimate stands in line with the Zacks Consensus Estimate of $1.39.
Zacks Rank:Orbital ATK has a Zacks Rank #4 (Sell). As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement.
ORBITAL ATK INC Price and EPS Surprise
ORBITAL ATK INC Price and EPS Surprise | ORBITAL ATK INC Quote
Factors to Consider
In 2012, Orbital ATK was awarded a contract for the production of U.S. military small-caliber ammunition worth $2.3 billion. However, the company had been incurring losses on the contract since 2014. An error in accounting was located after intense review and was therefore judged as a loss contract in 2016. Recognition of the loss-contract had led to a restatement of accounts for fiscal 2015. This restatement will continue to hurt free cash flow to the tune of $25–$30 million in 2016 and beyond.
Orbital ATK requires a variety of raw materials such as steel, zinc, aluminum, natural and synthetic rubber compounds, acrylonitrile, ammonium perchlorate and other substances for manufacturing end products. Rising prices of raw materials, disruptions in the supply chain and delayed replacement or addition of suppliers tend to hurt the company’s results.
Stocks to Consider
Here are some companies in the aerospace/defense industry worth considering on the basis of our model, which shows that it has the right combination of elements to post an earnings beat this quarter.
TransDigm Group Incorporated (TDG - Free Report) is expected to report third-quarter 2016 results on Nov 11. The company has an Earnings ESP of +0.33% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Triumph Group, Inc. (TGI - Free Report) has an Earnings ESP of +7.97% and a Zacks Rank #3. The company is slated to announce third-quarter 2016 earnings on Nov 3.
General Dynamics Corporation (GD - Free Report) has an Earnings ESP of +0.84% and a Zacks Rank #3. The company is slated to announce third-quarter 2016 earnings on Oct 26.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>