An Aerospace and Defense Giant with a Profitable Future Ahead

It is widely known that the U.S. government's budget tightening is an upcoming challenge for the Aerospace and Defense industry. Still, Alliant Techsystems Inc. (ATK) has managed to stay profitable through the first quarters of fiscal 2014 and is projected to stay on this path.

ATK is a diversified company and U.S. government contractor, which produces aerospace, defense and commercial products. Its production is divided into three operating groups: the Aerospace Group, the Defense Group and the Sporting Group. The company produces a range of articles, which vary from rocket motor systems, to missiles and small satellites, engineering and technical services. In addition to that it manufactures a variety of armaments systems as well as small, medium, and large caliber ammunition. Furthermore, Alliant is pointed towards the commercial market, and produces tactical systems, equipments and other products.

The company's diversified production, in addition to its competitive position in comparison to other industry peers, makes Alliant a great investment opportunity.

The Benefit of ATK's Competitive Position

Having to deal with competitors such as Astronics Cp (ATRO) or B/E Aerospace Inc. (BEAV), and being able to maintain a competitive position in the market, shows ATS´s ability for great evolution and profitable growth.

Alliant also benefits from a narrow economic moat. Having long-term contracts with its customers, that generate consistent revenue for years, is a great advantage. The long-term programs have high switching costs for the customer. For example, ATK produced the composite materials for the Hellfire missile for years.

In addition, leading the solid rocket propellant market should ensure increased annual revenue. The new Space Launch System (SLS), for which ATK is working with the NASA, is expected be as successful as the Space Shuttle program years ago.

Most important, Alliant is the biggest supplier of small-caliber ammunition for the U.S. military. Furthermore, ATK has managed to get new contracts in the U.S. military sector, such as the second full-rate production of the advanced anti-radiation guided missiles. This contract with the U.S. Navy was signed for a total of $102.4 million.

New Contracts and acquisitions should increase profitability

Alliant has developed a composite technology that brought in new customers such as Airbus Group NV (EADSY) and Boeing Co (BA). In addition, the company's composite material is required for the production of the F-35 jets. ATK produces around $1.8 million of the content in every F-35 jet that is constructed and generates $1.2 million worth of every A350.

New acquisitions create great expectations for shareholders, and this is the case of Alliant. The acquisition of Bushnell Group Holding Inc., that was completed in November of 2013, will amplify the customer base of Alliant´s Sporting Group even further, and is projected to increase earnings for the company.

Good Outlook for the Company's Future Performance

The future looks bright for Alliant Techsystems Inc. The company´s financial position will improve due to a better operating margin, cash flow optimization and profit improvement. Furthermore, ATK´s debt was reduced by 20% from $1.02 billion to $820 million last fiscal year. This boosted the company´s performance, leading to an increased free cash flow estimate for fiscal 2014. The operating margin is currently 10.80%, 2.30% higher than the industry median.

Top Logistics Stocks To Own Right Now

Shareholders' wealth should also see an increase, given ATK´s share repurchase program and its debt reduction initiatives. In the second quarter of fiscal 2014, $16.7 million where distributed to shareholders in the form of dividends. The ROC of 30.40% also demonstrates why this company is a great investment opportunity. Gurus like Joel Greenblatt (Trades, Portfolio) have seen this opportunity and feel bullish about this stock. For all the above mentioned reasons, I project a profitable future with increased earnings for this company.

Disclosure: Victor Selva holds no position in any stocks mentioned.

Currently 5.00/512345 Rating: 5.0/5 (2 votes)

Subscribe via Email Subscribe RSS Comments Please leave your comment:
More GuruFocus Links

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool

body{margin:0;padding:0} MORE GURUFOCUS LINKS

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool

ATK STOCK PRICE CHART 139.19 (1y: +108%) $(function(){var seriesOptions=[],yAxisOptions=[],name='ATK',display='';Highcharts.setOptions({global:{useUTC:true}});var d=new Date();$current_day=d.getDay();if($current_day==5||$current_day==0||$current_day==6){day=4;}else{day=7;} seriesOptions[0]={id:name,animation:false,color:'#4572A7',lineWidth:1,name:name.toUpperCase()+' stock price',threshold:null,data:[[1362978000000,66.84],[1363064400000,67.37],[1363150800000,69.64],[1363237200000,69.85],[1363323600000,70.19],[1363582800000,70.52],[1363669200000,71.31],[1363755600000,71.86],[1363842000000,70.85],[1363928400000,70.39],[1364187600000,71.22],[1364274000000,71.45],[1364360400000,72.3],[1364446800000,72.43],[1364792400000,71.3],[1364878800000,70.81],[1364965200000,70.69],[1365051600000,70.97],[1365138000000,70.74],[1365397200000,71.59],[1365483600000,72.14],[1365570000000,73],[1365656400000,74.12],[1365742800000,73.84],[1366002000000,72.45],[1366088400000,72.3],[1366174800000,70.82],[1366261200000,69.73],[1366347600000,70.73],[1366606800000,71.31],[1366693200000,72.3],[1366779600000,72.58],[1366866000000,73.28],[1366952400000,73.02],[1367211600000,73.73],[1367298000000,74.36],[1367384400000,74.35],[1367470800000,74.3],[1367557200000,72.97],[1367816400000,72.7],[1367902800000,73.44],[1367989200000,73.59],[1368075600000,73.34],[1368162000000,73.16],[1368421200000,75.15],[1368507600000,76.64],[1368594000000,77.38],[1368680400000,77.16],[1368766800000,77.78],[1369026000000,78.2],[1369112400000,77.55],[1369198800000,76.3],[1369285200000,77.07],[1369371600000,77.74],[1369717200000,78.84],[1369803600000,78.44],[1369890000000,79.12],[1369976400000,78.52],[1370235600000,78.7],[1370322000000,78.04],[1370408400000,76.77],[1370494800000,78.61],[1370581200000,79.74],[1370840400000,79.78],[1370926800000,79.34],[1371013200000,78.93],[1371099600000,79.89],[1371186000000,79.48],[1371445200000,79.85],[1371531600000,80.7],[1371618000000,79.66],[1371704400000,78.55],[1371790800000,79.11],[1372050000000,78.77],[1372136400000,78.76],[1372222800000,80.14],[1372309200000,81.94],[1372395600000,82.33],[1372654800000,83.89],[1372741200000,82.61],[1372827600000,83.51],[1373000400000,85.06],[1373259600000,85.31],[1373346000000,85.75],[1373432400000,86.83],[1373518800000,88.02],[1373605200000,88.37],[1373864! 400000,88.4],[1373950800000,88.08],[1374037200000,89.59],[1374123600000,90.51],[1374210000000,92.1],[1374469200000,91.09],[1374555600000,92.55],[1374642000000,92.02],[1374728400000,92.04],[1374814800000,91.9],[1375074000000,91.53],[1375160400000,91.79],[1375246800000,93.1],[1375333200000,95.34],[1375419600000,97.44],[1375678800000,96.36],[1375765200000,96.96],[1375851600000,97.19],[1375938000000,98.77],[1376024400000,99.4],[1376283600000,100],[1376370000000,100.49],[1376456400000,100.05],[1376542800000,98.36],[1376629200000,98.42],[1376888400000,98.72],[1376974800000,100.35],[1377061200000,99.01],[1377147600000,100.03],[1377234000000,100.62],[1377493200000,101.57],[1377579600000,97.97],[1377666000000,98.06],[1377752400000,98.88],[1377838800000,96.76],[1378184400000,96.49],[1378270800000,97.21],[1378357200000,98.34],[1378443600000,95.85],[1378702800000,96.67],[1378789200000,97.21],[1378875600000,96.7],[1378962000000,96.27],[1379048400000,97],[1379307600000,98.69],[1379394000000,98.94],[1379480400000,98.77],[1379566800000,98.28],[1379653200000,95.6],[1379912400000,95.16],[1379998800000,97.2],[1380085200000,97.14],[1380171600000,98.32],[1380258000000,98.23],[1380517200000,97.56],[1380603600000,98.66],[1380690000000,96.55],[1380776400000,96.48],[1380862800000,98.39],[1381122000000,97.47],[1381208400000,97.2],[1381294800000,97.05],[1381381200000,100.82],[1381467600000,101.15],[1381726800000,101.55],[1381813200000,100.41],[1381899600000,101.14],[1381986000000,103.69],[1382072400000,104.24],[1382331600000,103.52],[1382418000000,107.03],[1382504400000,109.11],[1382590800000,109.26],[1382677200000,109.79],[1382936400000,109.83],[1383022800000,110.27],[1383109200000,109.5],[1383195600000,108.87],[1383282000000,109.44],[1383544800000,110.65],[1383631200000,111.07],[1383717600000,111.86],[1383804000000,112.16],[1383890400000,115.15],[1384149600000,114.57],[1384236000000,113.93],[1384322400000,116.35],[1384408800000,117.21],[1384495200000,116.67],[1384754400000,117.07],[1384840800000,117.02],[1384927200000,116.02],[! 138501360! 0000,118..43],[1385100000000,119.85],[1385359200000,119.37],[1385445600000,120.07],[1385532000000,120.78],[1385704800000,121.23],[1385964000000,122.44],[1386050400000,120.39],[1386136800000,118.5],[1386223200000,118.5],[1386309600000,121.18],[1386568800000,120.75],[1386655200000,120.18],[1386741600000,118.1],[1386828000000,119.85],[1386914400000,120.93],[1387173600000,122.98],[1387260000000,121.16],[1387346400000,121.56],[1387432800000,120.37],[1387519200000,121.24],[1387778400000,121.36],[1387864800000,122.43],[1388037600000,122.28],[1388124000000,122.05],[1388383200000,121.47],[1388469600000,121.68],[1388642400000,120.03],[1388728800000,120.44],[1388988000000,120.39],[1389074400000,120.81],[1389160800000,120.56],[1389247200000,125.25],[1389333600000,135.89],[1389592800000,133.22],[1389679200000,128.54],[1389765600000,127.72],[1389852000000,129.46],[1389938400000,130.17],[1390284000000,131.13],[1390370400000,133.74],[1390456800000,133.39],[1390543200000,130.42],[1390802400000,129.69],[1390888800000,130.41],[1390975200000,130.97],[1391061600000,136.63],[1391148000000,143.7],[1391407200000,137.75],[1391493600000,136.66],[1391580000000,136.73],[1391666400000,137.55],[1391752800000,139.19],[1392012000000,135.61],[1392098400000,136.99],[1392184800000,137.75],[1392271200000,133.37],[1392357600000,130.4],[1392703200000,131.34],[1392789600000,129.53],[1392876000000,130.27],[1392962400000,133.69],[1393221600000,136.35],[1393308000000,133.54],[1393394400000,133.51],[1393826400000,138.2],[1393912800000,138.52],[1393999200000,137.35],[1394085600000,137.13],[1394172000000,139.19],[1394284880000,139.19],[1394284880000,139.19],[1394211851000,139.19]]};var reporting=$('#reporting');Highcharts.setOptions({lang:{rangeSelectorZoom:""}});var chart=new Highcharts.StockChart({chart:{renderTo:'container_chart',marginRight:20,borderRadius:0,events:{load:function(){var chart=this,axis=chart.xAxis[0],buttons=chart.rangeSelector.buttons;function reset_all_buttons(){$.each(chart.rangeSelector.buttons,function(index,value){value.s! etState(0)! ;});series=chart.get('ATK');series.remove();} buttons[0].on('click',function(e){chart.showLoading();reset_all_buttons();chart.rangeSelector.buttons[0].setState(2);var extremes=axis.getExtremes();$.getJSON('/modules/chart/price_chart_json.php?symbol=ATK&ser=1d',function(data){if(data!=null){var extremes=axis.getExtremes();axis.setExtremes(data[1][0][0],data[1][data[1].length-1][0]);chart.addSeries({name:'ATK',id:'ATK',color:'#4572A7',data:data[1]});if(data[0][1]>=0){display=data[0][0]+" (1D: +"+data[0][1]+"%)";reporting.html(display);}else{display=data[0][0]+" (1D: "+data[0]