Zacks Investment Research | Sep 04, 2017 09:58PM ET
Orbital ATK’s (NYSE:OA) performance is expected to be driven by diverse product offering and rising backlog.
Retaining this Zacks Rank #3 (Hold) stock in your portfolio is a good idea, given the following positive factors.
Positive Growth Projections: The Zacks Consensus Estimate for earnings is $6.19 on revenues of $4.64 billion for 2017. The bottom line reflects 11.44% year-over-year rise and the top-line projection is 4.06% higher. For 2018, the Zacks Consensus Estimate for earnings is pegged at $6.70 on revenues of $4.85 billion. While earnings represent 8.27% rally, revenues reflect a 4.54% increase.
Orbital ATK has long-term expected earnings per share growth rate of 9%.
Estimates Move Up: The Zacks Consensus Estimate has witnessed upward revisions in the last 30 days. Estimates for 2017 have improved 2.3%.
Strong Return: Orbital ATK’s shares have rallied 43.4% in the last 12 months, outperforming the industry’s gain of 32.7%.
Earnings Surprise for Last Quarter: The company delivered a positive earnings surprise of 7.6% during second-quarter 2017.
Growth Drivers
Orbital ATK’s diverse product offering and its involvement in major development and production programs will continue to boost its order book. In second-quarter 2017, the company received $1,400 million in new firm and option orders. As of Jul 2, 2017, the company registered a total backlog of nearly $15.4 billion (up 4% year over year), out of which, firm backlog was $9.5 billion (up 10% year over year).
Orbital ATK expects to generate free cash flow in the range of $250-$300 million in 2017, with bulk of the cash flow coming in the second half of the year. This is primarily due to the ramp up of operations of the projects that started in the first half of the year.
The global unrest associated with rising terror activities as well as the recent tension between the United States and North Korea has proved to be beneficial for the defense industry. President Trump has proposed a 10% hike in defense spending of fiscal 2018 which will enable defense giants to secure new orders from different verticals of the U.S. Defense.
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