It has been about a month since the last earnings report for Orbital ATK, Inc. . Shares have added about 4.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Orbital ATK Q2 Earnings and Revenues Beat Estimates
Orbital ATK, Inc. posted second-quarter 2017 adjusted earnings of $1.56 per share, beating the Zacks Consensus Estimate of $1.45 by 7.6%. However, earnings decreased 6.6% year over year from $ 1.67 per share.
Reported earnings decreased due to reduction in favorable contract profit adjustments this year.
Orbital ATK's total revenue in the second quarter came in at $1,115 million, beating the Zacks Consensus Estimate of $1,113 million by 0.2%.
Moreover, reported revenues were 2.9% higher than the year-ago figure of $1,084 million primarily due to improved sales from Flight Systems Group and Space Systems Group. This was partially offset by lower revenues from Defense Systems Group.
Flight Systems Group: Segment sales were up 13.6% year over year to $425 million owing to higher activity in the Aerospace Structures Division and increased production for both the government and commercial aircraft programs.
Defense Systems Group: The segment reported sales of $ 424 million, down nearly 6.6% year over year due to the impact of the Lake City facility production slowdown during the months of April and May. However, this was offset by increased revenue in the remainder of the segment.
Space Systems Group: The segment reported sales of $302 million, up 8.2% year over year, due to higher activity on government satellite programs. This rise was partially offset by decreased activity on commercial satellite programs.
Highlights of the Release
Total adjusted operating income in the quarter under review fell 8% to $135.7 million from $147.5 million year over year.
As of July 2, Orbital ATK's firm backlog was approximately $9.5 billion, up 10% year over year. Total backlog (including options, indefinite quantity contracts and undefinitized orders) was approximately $15.4 billion, up 4%.
Cash (used in) provided from operating activities during the quarter was ($4.3) million compared with $145.2 million provided in the year ago quarter.
Capital expenditure was $51.5 million in the quarter up from $38 million in the year ago quarter.
The company raised its 2017 earnings per share guidance in the range of $5.95–$6.25 from $5.80–$6.20. Revenues guidance has been raised to the range of $4,600–$4,650 million from $4,550–$4,625 million.
Free cash flow has been reiterated between $250 million and $300 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.
At this time, the stock has a strong Growth Score of A, though it is lagging a bit on the momentum front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for value and to a lesser degree momentum.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.