Led by its burgeoning business that sells ammunition, guns and accessories to hunters and sportsmen, ATK [ATK] yesterday delivered strong top and bottom line financial results and the company increased its outlook for the fiscal year.
Net income increased 42 percent to $93 million, $2.86 earnings per share (EPS), from $65 million ($2.00 EPS) a year ago, smashing consensus estimates by 52 cents.
Sales increased 7 percent to just over $1.1 billion from just under $1.1 billion a year ago.
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| ATK delivered the 100th Advanced Anti-Radiation Guided Missile to the Navy in the second quarter. Photo: ATK |
The revenue and profit growth was driven primarily by the Sporting Group, which posted a 130 percent jump in operating profits to$57.8 million and a 48 percent gain in sales to $421.4 million, of which 28 percent was organic. ATK attributed the gains in Sporting to higher ammunition volume, the recent acquisition of rifle maker Savage Arms, a price increase for ammunition and product mix.
The immediate for the Sporting Group continues to look strong, the company said. Mark DeYoung, ATK’s president and CEO, said that production at Savage Arms is sold out for several “months” with a “good backlog position” and solid demand, and that ammunition, which “clearly is the star for us” with “many, many, many months of backlog position against our capacity so that is obviously remaining very strong.”
ATK this month closed its $985 million acquisition of Bushnell, which makes optics, performance eyewear and other accessories for the sporting, hunting, golf and other markets. The deal greatly expands ATK’s sporting portfolio and the company sees room to add more products through acquisitions, DeYoung said on yesterday’s earnings call.
The company’s Aerospace Group eked out a 1 percent increase in sales to $319 million while operating profits were up 9 percent to $41 million due to a higher profit expectation on a multi-year commercial program that wasn’t disclosed. Sales were up on space work.
The Defense Group, which is bearing the brunt of federal fiscal woes, posted a 9 percent drop in sales to $472 million on lower small caliber ammunition sales while operating profits tumbled 15 percent to $55 million on the lower sales.
Orders were a healthy $1.5 billion, representing a book to bill ratio of 1.3, and backlog stood at $8.4 billion, down $100 million from the end of the first quarter.
ATK raised its earnings guidance for FY ’14 to between $9.10 and $9.40 EPS from the prior outlook of between $8.60 and $9.00 EPS to account for better than expected sales and strong operating performance, partially offset by 50 cents EPS headwind related costs for the Bushnell acquisition.
ATK raised its sales expectations to around $4.7 billion, up from prior guidance of between $4.3 billion and $4.4 billion, with most of the gain stemming from Bushnell and the rest from strong operating performance. Free cash flow is expected to be between $210 million and $230 million, an increase from previous guidance of between $200 million to $225 million.