On Jan 7, 2014, Zacks Investment Research upgraded Alliant Techsystems Inc. (ATK) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Alliant reported positive earnings surprises in each of the past 4 quarters with an average earnings beat of 13.4%. The company’s long-term expected earnings growth is pegged at 6.1%. The timely completion of the Bushnell acquisition, synergies from recent acquisitions and a stable inflow of contracts are expected to drive the bottom line.
In the second quarter of fiscal 2014, Alliant’s top and bottom line beat the Zacks Consensus Estimate, primarily on the back of strong contribution from its Sporting segment and a decline in interest expenses.
The company continues to strengthen its product offering under the Sporting segment, as demand for sporting products is rising significantly in the U.S. Year to date, the company has completed two major acquisitions:
In Nov 2013, the company acquired Bushnell Group Holding Inc., a provider of sports optics, outdoor accessories, performance eyewear and affordable sports products for sports fans. Bushnell has been merged with Alliant’s Sporting segment.
In addition, Alliant took over Caliber Company in Jun 2013, with a transaction value of $315 million. The acquired unit added $57 million to revenues in the second quarter of fiscal 2014.
An acquisition-driven strategy will enable the company to expand its existing footprint besides providing both financial as well as operational synergies.
Alliant also has a steady dividend payment record. During the first six months ended Sep 29, 2013, the company paid common stock dividends of $16.7 million. The practice of returning wealth to shareholders will help keep investor interest in the stock.
The present valuation also makes Alliant attractive. As of Jan 6, 2013, the company’s forward P/E multiple was 12.9x, a discount of 5.8% to the peer group average of 13.7x. Return on equity of the company was 19.1%, marginally higher than the peer group average.
Other Stocks to Consider
Some other stocks worth considering in the aerospace and defense equipment industry include Elbit Systems Ltd. (ESLT), Astronics Corporation (ATRO) and B/E Aerospace Inc. (BEAV). While Elbit Systems holds a Zacks Rank #1 (Strong Buy), Astronics and B/E Aerospace carry a Zacks Rank #2 (Buy).