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Orbital ATK (OA) Set to Flourish on Merger Synergies - Analyst Blog

Zacks Equity Research

We updated a research report on Orbital ATK, Inc. OA on Jun 2, 2015. The company’s association with the U.S. government and international defense establishments as well as the NASA will likely boost its order book. Synergies from its recent merger are expected to increase the company’s margins, going forward. However, intensifying competition in the defense space, dependence on government budgets and capital-intensive operations are potential growth deterrents.

Dulles, VA-based Orbital ATK debuted with an earnings beat in its first reported quarter. Earnings in fiscal fourth-quarter 2015 also increased year over year on account of higher operating income in all the three segments. Revenues however failed to impress, declining from the prior year.

Orbital ATK is expected to become one of the leading operators in the aerospace and defense markets, driven by a perfect mix of Alliant Techsystems’ and Orbital Sciences Corporation’s diversified resources.

As both Alliant Techsystems and Orbital Sciences were previously engaged in similar lines of businesses, consolidation of their operations will help Orbital ATK to reduce operating costs, maximize efficiency, enhance its product and service portfolio and expand the geographical footprint.

Orbital ATK has a significant presence in the defense and commercial aerospace markets. The company provides assistance to the Pentagon, U.S. law enforcement agencies and foreign governments. It also builds satellites for commercial and government customers, and operates small research rockets and high-altitude scientific balloons.

However, budget deficits and political uncertainty make future defense budgets susceptible to cutbacks. This might have an adverse impact on Orbital ATK’s top line.

Zacks Rank

Orbital ATK currently sports a Zacks Rank #1 (Strong Buy). Other well-placed stocks in the same space include TransDigm Group Incorporated TDG also carrying a Zacks Rank #1 and Hexcel Corp. HXL and Raytheon Company RTN carrying a Zacks Rank #2 (Buy).

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