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Alliant Techsystems Inc. (ATK - Analyst Report) has received a contract worth $52.7 million from the Missile Defense Agency (“MDA”). The company’s Defense segment will take responsibility for this project.

Per the agreement, Alliant will provide its support to develop MDA’s Modular Divert and Attitude Control System (“MDACS”) technologies and will offer components for new MDACS system architecture for the longer mission timelines to counter the growing threats.

These technologies are appropriate for the Standard Missile-3 (“SM-3”) Block IIB missile interceptors. The company’s approach toward a ship-board compatible MDACS operation improves kinetic performance of the SM-3 Block II along with offering advancement to the missile’s performance.

Alliant’s MDACS propulsion system offers the impulse needed for the kinetic warhead to hit the specific targets. In addition, performing end-game maneuvers for final intercept, MDACS propulsion system, helps in maintaining stable flight.

Alliant has an experience of 35 years, with a strong engineering team to develop and manufacture missile defense Divert and Attitude Control System (“DACS”) and drive innovative solutions for future interceptors.

During the second quarter of fiscal 2013 earnings call, Alliant’s Defense segment reported a 9% drop in sales to $484 million from $528 million in the prior-year quarter. However, excluding the impacts of sales related to the Radford Army Ammunition Plant (“RFAAP”) and favorable contract resolution, the unit witnessed a 5% year-over-year rise in sales driven by higher sales of small caliber systems.

Alliant’s two biggest customers are the U.S. Department of Defense and the National Aeronautics and Space Administration. We believe that U.S. defense budget cutbacks could limit the company’s future growth prospects. In addition, higher degree of competition from a number of players in each of its business areas is also our major concern.

However, we expect this to be partially mitigated by up-cycle in the Aerospace segment, which will in turn contribute significantly to the company’s future profitability. 

Considering the positive and negative factors, we prefer Alliant Techsystems to have a short-term Zacks #2 Rank (Buy rating). One of its peers Rockwell Collins Inc. (COL - Analyst Report) has short-term Zacks #3 Rank (Hold rating).

Arlington, Virginia-based Alliant Techsystems Inc. provides aerospace and defense products to the U.S. government agencies. The company also supplies ammunition and related accessories to law enforcement agencies and commercial customers. With a market capitalization of $1.98 billion, Alliant has 17,000 full time employees.

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