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Tickers in this Article: ATRO, ATK, XLS, HEI
We have maintained our Neutral recommendation on aerospace and defense company Alliant Techsystems Inc. (ATK). The company currently has a Zacks Rank #3 (Hold).

Why the Reiteration?

In fourth-quarter and fiscal-year 2013, Alliant’s earnings per share and revenues beat the Zacks Consensus Estimate. The encouraging results were primarily due to solid bookings in the Sporting division, lower interest expenses and a decline in the tax rate.

As of Mar 31, 2013, Alliant had a cash balance of $417.3 million and cash provided by operating activities of $274 million at the end of fourth quarter of fiscal 2013. A stable financial position enables the company to pursue an inorganic growth strategy, while maximizing shareholder wealth through dividend payments and share repurchases.

In Jun 2013, Alliant acquired Caliber Company for $315 million. This acquisition will expand the company’s product coverage and strengthen its market position as Caliber Company’s product portfolio comprises shotguns, hunting rifles, commercial and security ammunitions along with a presence in the shooting sports domain.

Apart from investment in growth projects, Alliant repurchased shares worth $60 million under its $200 million, 2-year share repurchase program and distributed $33 million to its shareholders as dividend in the fourth quarter of fiscal 2013.

However, the U.S. defense budget cutbacks and competition from numerous players in each of Alliant’s business segment could limit its growth prospects.

In addition, the ongoing withdrawal of troops from Afghanistan could decrease demand for small-caliber ammunition, resulting in short-term revenue decline.

Other Stocks to Consider

The stocks in the industry that are worth considering include Astronics Corporation (ATRO), Exelis, Inc. (XLS) and HEICO Corporation (HEI), each with a Zacks Rank #1 (Strong Buy).

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