Orbital ATK [OA] on Thursday posted lower earnings despite higher sales but the company said its tracking at or ahead of plan this year, leading it to raise its guidance for 2017.
Net income fell 4 percent to $87.1 million, $1.51 earnings per share (EPS), from $90.7 million ($1.55 EPS) a year ago, driven by lower operating profits in the Defense Systems and Space Systems Groups. The company blamed fewer favorable contract profit adjustments in both groups in the second quarter versus a year ago for the earnings decline.
A lower tax rate partially offset the lower segment operating income.
Adjusted earnings results, which exclude costs related to the company having to restate financial statements stemming from an unexpected loss on an Army ammunition contract, were $1.56 EPS, which beat consensus estimates by 12 per share.
Sales in the quarter increased 3 percent to just over $1.1 billion from just under $1.1 billion a year ago. The higher revenues were driven government and commercial aircraft programs within the Aerospace Structures Division of the Flight Systems Group, and higher activity on government satellite programs in Space Systems.
The company said that a production slowdown at the Army’s Lake City Ammunition Plant stemming from a previously disclosed accident clipped $40 million off the top line.
Given results through the first half of the year, Orbital ATK narrowed and increased its adjusted earnings guidance to between $5.95 and $6.25 EPS versus the prior outlook of between $5.80 and $6.20 EPS. The company raised its sales outlook slightly to between $4.6 billion and $4.7 billion, up $50 million on the low end and $25 million on the high end of the previous guidance.
Bookings in the quarter were a strong $1.4 billion, while firm backlog increased 10 percent from a year ago to $9.5 billion and total backlog increased 4 percent to $15.4 billion. Free cash was a $55.8 million outflow due largely to the temporary shutdown of Lake City although the company maintained its cash flow guidance for the year.