Earnings Preview: ATK

Aerospace and defense company Alliant Techsystems Inc. (ATK - Analyst Report) is slated to release its first-quarter fiscal 2013 earnings results before market open on August 9, 2012.

Prior-Quarter Recap

Alliant Techsystems' operating earnings of $1.86 per share for its fourth quarter of fiscal 2012 ended March 31, 2012, exceeded the Zacks Consensus Estimate of $1.70 but fell short of the year-ago earnings of $2.10 per share.

The year-over-year decline in earnings was due to margin pressure in its Security and Sporting segment as commodities cost rose and defense contracts got delayed. Besides, charges incurred to realign the business segment and higher pension expenses affected profitability.

Alliant's total revenue in the fourth quarter of fiscal 2012 was $1,316.2 million, up from $1,301.6 million reported in the year-ago quarter. Alliant’s revenues during the quarter surpassed the Zacks Consensus Estimate.

The results were driven by better execution at the Missile Products and Security and Sporting segments, marginally offset by a slackened performance at Aerospace Systems and Armament Systems.

The company incurred a steeper cost of sales in the fourth quarter compared with the prior-year quarter. Consequently, gross profit of the company decreased 8.6% in the reported quarter to $242.6 million.

Alliant’s total operating expenses declined in the fourth quarter by 19.4% on a year-over-year basis. The dip was primarily due to the decline in general & administrative expenses.

Guidance for Fiscal 2013

Alliant expects total revenue for fiscal 2013 in a band of $4.0 billion to $4.1 billion.

The company now expects earnings per share for fiscal 2013 in the range of $6.25 to $6.55. Alliant has raised its earnings expectation by 25 cents as pension expenses are likely to be $15 million lower than the previous expectation.

Zacks Consensus

The Zacks Consensus Estimate for the first quarter of fiscal 2013 is $1.40 per share, an estimated decline of 30.5% from $2.02 reported in the year-ago quarter. The current Zacks Consensus Estimate ranges between $1.28 per share and $1.51 per share.

The fiscal 2013 Zacks Consensus Estimate is $6.47, down 26.4% from $8.78 reported in the prior year. The current Zacks Consensus Estimate ranges between $6.65 and $6.25 per share.

Estimate Revisions Trend

Agreement

There were no changes in the quarterly estimates in the last 7 and 30 days.

For fiscal 2013 too none of the estimates were changed in the past 7 and 30 days.

Magnitude

The consensus estimates for first quarter 2013 and full year 2013 have remained stagnant over the last 7 and 30 days because of a stalemate in estimate revsions.

Surprise History

The company has consistently surpassed our expectation in the last four quarters. The earnings surprise in the last four quarters ranged from 2.02% to 12.87%. The average surprise over the last four quarters is 6.93%.

Our Recommendation

Alliant Techsystems is a well-diversified aerospace and defense contractor delivering products and solutions that are vital to the preservation of U.S. national security. We believe Alliant’s decision to realign its reporting segments into three business units will make the company more competitive and increase the efficiency of operation.

The company has been registering steady organic growth and has also benefited from strategic acquisitions. Leveraging its financial strength, the company has been able to repay debts, authorize share repurchases and pay dividends. These initiatives will help the company to maximize investor wealth and attract investor attention.

Alliant however faces competition from a number of players in specific business niches. Some of its primary competitors are Rockwell Collins Inc. (COL - Analyst Report) and Spirit AeroSystems Holdings Inc. (SPR - Snapshot Report). Its future growth prospects are also tied to the U.S. defense budgets, which are expected to decline in the long run. Given the pros and cons, the stock retains a Zacks #3Rank implying a 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.