We project that Alliant will strongly outperform the market over the next 6 to 12 months. This projection is based on our analysis of three key factors that influence common stock performance: earnings strength, relative valuation, and recent price movement.
Alliant Techsystems is an aerospace, defense and commercial products company. The company has three segments: Aerospace Group, which provides rocket motor systems for human and cargo launch vehicles, missiles, missile defense interceptors, micro-satellites, satellite components, structures and subsystems, space deployables and solar arrays; Defense Group, which provides military ammunition, propulsion systems for tactical missiles and missile defense applications, strike weapons, precision munitions, gun systems, aircraft survivability systems, fuzes and warheads, energetic materials and mission aircraft; and Sporting Group, which provides commercial ammunition and accessories and tactical systems.
Earnings Strength is Positive
Ford’s earnings momentum measures the acceleration or deceleration in trailing 12 month operating earnings per share growth. The upward curvature of the plotted points in the graph below (click for a larger version) indicates that while Alliant Techsystems Inc.'s earnings have increased from $8.18 to an estimated $8.62 over the past 5 quarters, they have shown acceleration in quarterly growth rates when adjusted for the volatility of earnings. This indicates an improvement in future earnings growth may occur.
Relative Valuation is Very Positive
Alliant Techsystems’ operating earnings yield of 8.9% ranks above 89% of the other companies in the Ford universe of stocks, indicating that it is undervalued. Ford measures the relative valuation of each company against all other companies in our research universe. Operating earnings yield, an earnings-to-price ratio based on the last three quarters of operating earnings and the current quarter’s estimate, has proven to be the most reliable relative valuation measure.
Price Movement is Very Positive
Alliant’s stock price is up 97.5% in the last 12 months. ... This historical performance should lead to above average price performance in the next one to three months.
Strong Buy.
Richard Segarra, CFA, Ford Equity Research, www.fordequity.com, 800-842-0207, August 30, 2013