Ahead of the Bell: Alliant Techsystems

Alliant Technology's sluggish stock price growth belies potential, analyst says

• On 8:28 am EDT, Monday September 21, 2009

HARTFORD, Conn. (AP) -- The relatively lackluster performance of Alliant Techsystems Inc. belies the military contractor's potential and reflects investors' anxiety about NASA's plans for the Ares rocket program on which Alliant works, an analyst said Monday.

Analyst Howard A. Rubel of Jefferies & Co. maintained a "Buy" rating for the Minneapolis, Minn., company's shares.

Alliant is pursuing "attractive opportunities in space exploration, precision munitions and composite materials that may provide for meaningful additions to growth," he said in a note to clients.

Shares have "significantly underperformed" the market and other defense contractors in recent months, primarily due to concerns over the future of Alliant's NASA business, Rubel said.

NASA spending accounts for about 20 percent of Alliant's revenue, he said.

"We believe these concerns are overstated and distract from the overall attractiveness of the broader enterprise," Rubel said.

Shares of Alliant have risen nearly 27 percent since the market's low point in March, while the Standard & Poor's 500 index has increased about 58 percent.

Alliant's shares have underperformed though it was the only defense contractor to post a significant rise in its most recent earnings, Rubel said. And Alliant is the only mid- to large-cap defense company he covers that has had a "meaningful increase" in its earnings expectations for 2009 and next year, he said.

A presidential commission has recently suggested that alternatives to Alliant's Ares I rocket "may be better suited for NASA under its currently constrained budget authority," Rubel said.

"While no one inside of NASA, the White House or Congress has said or even suggested that the Ares I be terminated, the market already appears to be assuming this worst-case outcome," he said.

Members of Congress have "sharply contested" many of the report's findings and voiced strong support for Constellation and the Ares I programs, Rubel said.

Buzz up!