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Alliant Still Outperforms

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We reaffirm our recommendation on Alliant Techsystems Inc. to Outperform. In first-quarter fiscal 2013, the company’s earnings and revenue surpassed the Zacks Consensus Estimates as well as year-ago numbers. These solid results were driven by proper execution of the programs at the Defense Group and Sporting Group segments, increase in ammunition sales volume and steady order flow.

We know that Alliant has recently completed its segment realignment process. We believe this segment realignment will enable the company to maximize its operational efficiency, enhance support of customers' requirements, reduce operating cost, leverage the investments and execute excellence initiatives. These positive factors gradually improve Alliant’s overall financial performance going forward.  

In the last few years, Alliant has grown substantially as a result of both internal expansion and a series of acquisitions. The company completed several major acquisitions in the past five years, which includes Blackhawk Industries Products Group Unlimited LLC and Eagle Industries. These acquisitions significantly expanded the company’s sales into the tactical accessories market, enabling it to leverage its existing distribution network to gain market-share while realizing synergies.

We view Alliant as a well-diversified aerospace and defense contractor delivering products and solutions that are vital to the preservation of the U.S. national security. It is a leading global supplier of solid rocket motors and one of the largest manufacturers of ammunitions in the U.S.

It is the sole supplier of various calibers of ammunition to the U.S. Department of Defense. In addition, Alliant has a strong relationship with NASA and is developing the Ares 1 Solid Rocket to replace the Space Shuttle. This diverse revenue stream of the company will go a long way in improving its future revenue.  

However, the U.S. defense budget cutbacks and competition from a number of players in each of Alliant’s business segment could limit the growth prospects of the company. In addition, the ongoing withdrawal of troops from Afghanistan could lead to a decrease in demand for small-caliber ammunition, resulting in short-term revenue decline.

Alliant Techsystems Inc. currently has a short-term Zacks #1 Rank (Strong Buy rating).

Minneapolis, Minnesota-based Alliant Techsystems Inc. supplies aerospace and defense products to the United States government agencies. The company also provides ammunition and related accessories to law enforcement agencies and commercial customers. The company competes with General Dynamics Corporation (GD - Free Report) .

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