Boosted by a settlement last month with a supplier, Orbital ATK [OA] on Tuesday posted solid third quarter financial results and the company increased its top and bottom line guidance for the year.
Sales increased 2 percent to $1.1 billion from $1.1 billion a year ago after rounding. Adjusted net income rose 16 percent to $80 million, $1.35 earnings per share (EPS), from $69 million ($1.15 EPS), topping consensus estimates by 25 cents per share.
The higher earnings were led by a $50 million settlement with Aerojet Rocketdyne [AJRD] related to Orbital ATK’s Antares rocket launch failure one year ago for a Cargo Resupply Services mission for NASA. The earnings increase was also aided in part by lower taxes.
Orbital ATK’s operating margins were up 110 basis points to 11.9 percent.
The sales and earnings gains were led by the company’s Space Systems Group, which reported higher revenues and operating income in its commercial and government satellite divisions with the primary driver being the settlement with Aerojet Rocketdyne. Revenues and operating income were lower in the Defense Systems and Flight Systems Groups on softness in the Small Caliber Division and a settlement with a supplier in the Launch Vehicles Division.
Bookings in the quarter were a robust $2.9 billion, firm backlog stood at $8.7 billion, total backlog including options and indefinite delivery, indefinite quantity contracts totaled $13.8 billion, and free cash flow was $113.8 million.
Based on year-to-date results, Orbital ATK increased its 2015 earnings guidance to between $4.75 and $4.85 EPS from the prior outlook of $4.60 to $4.80 EPS. Sales are expected to be $4.5 billion versus a prior range of just above $4.4 billion to $4.5 billion.
Orbital ATK didn’t provide initial guidance for 2016 but David Thompson, president and CEO, said on an analyst call the “general outlook” is for higher revenues “at a stronger pace than this year” and higher operating margins but not the full percentage point they are likely to be up in 2015. Per share earnings will also be up as will cash flow and capital deployment, he said.
Thomson said that the company’s backlog supports “virtually all of our projected 2015 revenues and approximately 80 percent of our 2016 revenues.” He expects Orbital ATK to achieve another $1.5 billion to $2 billion in bookings in the fourth quarter.
The company said it made good progress in the third quarter on repairs to the Wallops Island, Va., launch facility, site of the October 2014 Antares launch explosion, and is on track for the next Antares launch there in the spring of 2016. The company will do a first stage Antares rocket hot fire test in January 2016 in preparation for launch.