Alliant wins government contract

The deal with the US Army for semiautomatic rifles is worth $16.8 million.

By Zacks.com Sep 14, 2012 12:43PM

By Zacks Equity Research


Alliant Techsystems Inc. (ATK) has received a contract worth $16.8 million from the U.S. Army. It's an engineering and manufacturing development contract modification for Alliant's XM25 and Individual Semi-Automatic Airburst System.


According to the agreement, the company will continue to design, integrate, produce and examine these fully functional systems. Alliant also will check the weapon's final design as per the performance requirement.


The XM25 is a semiautomatic rifle with caliber, weight, length and magazine capacity of 25mm, 12 to 12.5 pounds, 29.5 inches and 4 rounds, respectively. This rifle fires a 25mm airbursting round set by the weapon's integrated target acquisition and fire-control system to burst straight above a selected object. This system permits soldiers to quickly and accurately target an object by producing an adjusted aim-point based on range, environmental aspects, and user inputs.


Alliant is the main contractor, supplier, operations integrator and ammunition provider for the XM25 program. This program management is located in the company's Armament Systems Division in Plymouth, Minnesota. The other players of this program include Heckler & Koch and L-3 Communications Holdings Inc.'s (LLL) Integrated Optical Systems division.


Alliant will also be providing assistance to Army XM25 Forward Operational Assessments (FOA), which is planned for 2013 with a 36-gun battalion set of new pre-production prototypes.


The U.S. Army used early XM25 prototype weapons in Afghanistan from 2010 to 2012. At the same time, the army carried out FOA with these weapons. After gathering feedback from the soldiers, the U.S. Army intimated their comments on the weapons related to system improvements, tactics and other issues to Alliant. 


Alliant plays a significant role to meet the U.S. Army's demand for several caliber ammunitions. In June 2012, Alliant received a contract, worth $36 million, from the U.S. Army to provide 120mm training ammunitions for M1A1/A2 Abrams main battle tanks.


As far as Alliant's XM25 contracts are concerned, Alliant was awarded a contract modification, worth $24 million, from the U.S. Army in November 2011. According to the agreement, the company provided additional ammunition, hardware, test and analysis support additional user evaluations of the XM25 and Individual Semi-Automatic Airburst System to the army. 


We view Alliant as an organization with a well-diversified product portfolio. It is one of the important aerospace and defense products and solutions contractors of the U.S. Department of Defense. The company provides various calibers of ammunition, including small-arms ammunition, composite components for commercial and military aircrafts, and precision-strike weapon systems to the U.S. armed forces and police.


In addition, the company has a strong relationship with the National Aeronautics and Space Administration (NASA) and is working with NASA to develop the Ares 1 Solid Rocket to replace the Space Shuttle.


We believe these expanded revenue streams enable the company to improve its forthcoming financial as well as operational performance.


Alliant Techsystems Inc. currently retains a Zacks No.1 Rank, which translates into a short-term "strong buy" rating.


Based in Minneapolis, Minn., Alliant Techsystems supplies aerospace and defense products to U.S. government agencies. The company also supplies ammunition and related accessories to law enforcement agencies and commercial customers.


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