Alliant Beats on Q3 Earnings and Revs

Alliant Techsystems Inc. (ATK) reported third quarter fiscal 2014 pro forma earnings of $2.87 per share, outpacing the Zacks Consensus Estimate of $2.00 per share by 43.5% and up 56.0% from the comparable year-ago period.

Solid performance by the Sporting business led to the upswing in earnings. However, the growth was partially offset by higher interest expense.

GAAP earnings per share were $2.46 compared with $1.93 in the prior-year quarter. The difference between pro forma and GAAP earnings was due to transaction cost of 26 cents, deferred financing cost of 12 cents and inventory step-up of 3 cents.

Total Revenue

Alliant's total revenue in the third quarter fiscal 2014 was $1.2 billion, surpassing the Zacks Consensus Estimate by 1.0%. Reported revenue also exceeded the year-ago figure by 14.4%.

Revenue increased on the back of Aerospace and Sporting Group sales, partially offset by a decline in contribution from Defense Group.

Segmental Update

Aerospace Group: Segment sales increased 4.3% to $0.32 billion. The year-over-year increase reflects higher sales at the Space Systems Operations and Aerospace Structures divisions.

Defense Group: This segment reported sales of $0.46 billion, down 10.4% year over year, due to a sales decline at Armament Systems and Small Caliber Systems divisions and from federal budget reductions.

Sporting Group: This segment registered a substantial 78.2% increase in sales to $0.53 billion from the prior-year quarter. This upside was driven by the recent acquisitions of Savage and Bushnell.

Corporate and Other: Corporate and other expenses totaled $22.0 million, up from $14.0 million in the prior-year quarter due to costs incurred from acquisitions and a large portion of inter-company profit eliminations. This was partially offset by lower pension expense.

Operational Highlights

Alliant’s cost of sales was $0.92 billion in the fiscal third quarter, up 9.9% from the year-ago quarter. Gross profit moved up to $0.29 billion from $0.22 billion registered in the prior-year period, indicating growth of 31.7%.

Total operating expenses in the reported quarter were up 27.0% to $0.14 billion from $0.11 billion in fiscal third quarter 2013. Higher expenses were attributed to a rise in selling and general and administrative expenses.

Interest expenses totaled $28.5 million, up 102.5% year over year due to debts issued in the reported quarter.

Financial Update

Cash and cash equivalents as of Dec 29, 2013, were $ 0.19 billion versus $0.42 billion as of Mar 31, 2013.

Long-term debt as of Dec 29, 2013, was $1.9 billion versus $1.02 billion as of Mar 31, 2013.

Cash provided by operating activities in the first nine months of fiscal 2014 was $0.22 billion versus $0.12 billion in the comparable year-ago period.

Alliant’s capital expenditure was $80.6 million at the end of the first nine months of fiscal 2014 versus $61.4 million in the comparable period of the previous year.

Free cash flow for the third quarter was $0.14 billion compared with $0.057 billion in the prior-year period

Share repurchases update

In the reported quarter, Alliant repurchased shares worth $4.0 million, bringing the total value of shares repurchased to $0.11 billion since the formation of a two-year share repurchase program on Jan. 31, 2012. However, this repurchase program has been extended until March 31, 2015.

Guidance

Alliant increased its sales forecast for fiscal 2014 to the range of $4.73–$4.78 billion from the previous guidance of $4.68–$4.73 billion, taking into consideration its strong operating performance from the Sporting Group segment.

Alliant’s fiscal 2014 earnings expectation is now $9.50 to $9.80, up from its previous guidance of $9.10 to $9.40, on the back of a higher top line and lower expected tax rate.

Alliant expects fiscal 2014 free cash flow in the range of $0.22 billion to $0.24 billion, up from the previous guidance of $0.21 billion to $0.23 billion.

Other Company Releases

Lockheed Martin Corporation (LMT) posted fourth-quarter 2013 operating earnings of $2.17 per share, which surpassed the Zacks Consensus Estimate of $1.98 by 9.6%.

Raytheon Company (RTN) reported fourth-quarter 2013 adjusted earnings of $1.58 per share, beating the Zacks Consensus Estimate of $1.35 by 17.0%.

General Dynamics Corporation (GD) reported fourth-quarter 2013 earnings of $1.76 per share, meeting the Zacks Consensus Estimate.

Zacks Rank

Alliant Techsystems currently has a Zacks Rank #2 (Buy).

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