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Orbital ATK (OA) Q1 Earnings Miss, Revenues Beat Estimates

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Orbital ATK, Inc.'s first-quarter 2017 adjusted earnings of $1.23 per share missed the Zacks Consensus Estimate of $1.36 per share by 10.6%. Reported earnings decreased 14.6% year over year.
Reported earnings decreased as earnings per share reflected a higher income tax rate of 29.3% in the first quarter of 2017 compared to a 25.1% rate in the year ago quarter and non repetition of discrete events that had occurred in the prior-year quarter.

Total Revenue

Orbital ATK's total revenue in the first quarter came in at $1,085 million, beating the Zacks Consensus Estimate of $1,083.7 million by 0.1%.

Moreover, reported revenues were 2.7% higher than the year-ago figure of $1,056 million primarily due to improved sales from Flight Systems Group, Space Systems Group and Defense Systems Group, partially offset by an increase in corporate revenue eliminations.

Orbital ATK, Inc. Price, Consensus and EPS Surprise

Segmental Update

Flight Systems Group: Segment sales were up 4.8% year over year to $371 million owing to five launches of U.S. strategic missiles, three Delta IV and Atlas V space launches with propulsion systems and composite structures. Adjusted operating income fell 18.3% to $40.6 million.

Defense Systems Group: The segment reported sales of $451 million, up 4.6% year over year due to the production of approximately 400 million rounds of caliber ammunition, about 4,000 tactical missile motors and 3,000 precision artillery and mortar rounds. However, adjusted operating income decreased 8.9% to $42.0 million.

Space Systems Group: The segment reported sales of $301 million, up 5.2% year over year, due to successful launch and check-out of the first group of 10 Iridium NEXT satellites that the company assembled, integrated and tested. Adjusted operating income fell 9.6% to $27.4 million.

Highlights of the Release

Total adjusted operating income in the first quarter fell 9.8% to $117.4 million.

As of Mar 31, 2017, Orbital ATK's firm backlog was approximately $9.8 billion, up 12% year over year. Total backlog (including options, indefinite quantity contracts and undefinitized orders) was approximately $14.8 billion, up 3%.

Financial Highlights

Cash used by operating activities during the quarter was $46.4 million.

Capital expenditure was $36.6 million in the quarter.


The company has maintained 2017 earnings per share guidance in the range of $5.80–$6.20. Revenues are projected in the range of $4,550–$4,625 million.

Free cash flow is expected to be between $250 million and $300 million.

Peer Releases

Spirit Aerosystems Holdings, Inc. (SPR - Free Report) posted first-quarter 2017 earnings from continuing operations of $1.17 per share, in line with the Zacks Consensus Estimate.

Rockwell Collins, Inc. posted first-quarter 2017 earnings from operations of $1.34 per share, beating the Zacks Consensus Estimate of $1.31 per share by 2.3%.

Raytheon Company (RTN - Free Report) posted first-quarter 2017 earnings from operations of $1.73 per share, beating the Zacks Consensus Estimate of $1.61 per share by 7.5%.

Zacks Rank

Orbital ATK currently carries a Zacks Rank #4 (Sell).

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