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Orbital ATK (OA) Posts in-Line Q1 Earnings, Revenues Lag

Orbital ATK, Inc.’s OA first-quarter 2016 adjusted earnings of $1.31 per share came in line with the Zacks Consensus Estimate but surged 14.9% from the year-ago tally.

On a GAAP basis, the company reported earnings of $1.19 per share, compared with 87 cents earned in the prior-year quarter.

Total Revenue

Orbital ATK's total revenue in the first quarter was $1,065 million, lagging the Zacks Consensus Estimate of $1,138 million by 6.4%. Reported revenues also fell 4.6% from the year-ago figure of $1,116 million, primarily due to lower sales from Defense Systems Group.

Segmental Update

Flight Systems Group: Segment sales dipped 2.7% year over year to $356 million. Adjusted operating income, however, climbed 11.9%. Lower sales at Propulsion Systems were mostly offset by increased sales and profit margins at the Launch Vehicles division.

Defense Systems Group: The segment reported sales of $437 million, down 12.9% year over year. Adjusted operating income was also down 23.1% primarily due to higher product shipments in first-quarter 2015.

Space Systems Group: The segment reported sales of $287 million, flat year over year, while adjusted operating income surged 40.7% primarily on the back of higher profit margins at Satellite Systems.

Highlights of the Release

Total adjusted operating income climbed 7.6% to $125.6 million backed by higher contributions from Flight Systems Group and Space Systems Group, partially offset by lower income at Defense Systems Group.

Cash and cash equivalents in the reported quarter was $74 million as of Apr 3, 2016, down from $104 million as of Dec 31, 2015.

Long-term debt as of Apr 3, 2016, stood at $1,551 million, up from $1,436 million as of Dec 31, 2015.

Capital expenditure was $22.6 million in the quarter. The company used $75.1 million in operating activities.

The company had firm backlog of around $8.6 billion as of Apr 3, 2016, up 8% from the year-ago quarter, while its total backlog was up 23% to nearly $14.8 billion (including options, indefinite quantity contract and undefinitized orders).

Share Repurchase & Dividend Payment

Orbital ATK repurchased nearly $27 million of its common stock and paid dividends of around $18 million during the first quarter of 2016, returning a total of $45 million to shareholders.

New Business

In the first quarter of 2016, the company recorded nearly $2,505 million in new firm and option contract bookings. In addition, it received around $720 million in option exercises under existing contracts.

Guidance

The company maintained its 2016 earnings guidance in the range of $5.25–$5.50 per share on revenues of $4,575–$4,650 million. Free cash flow is expected to be between $275 million and $325 million, while capital expenditure is projected at about $200 million.

Peer Releases

Spirit AeroSystems Holdings, Inc. SPR posted first-quarter 2016 adjusted earnings of $1.29 per share, beating the Zacks Consensus Estimate of $1.06 by 21.7%.

Raytheon Company RTN reported first-quarter 2016 adjusted earnings from continuing operations of $1.43 per share, beating the Zacks Consensus Estimate of $1.36 by 5.1%.

The Boeing Company BA reported first-quarter 2016 adjusted earnings from continuing operations of $1.74 per share, lagging the Zacks Consensus Estimate of $1.81 by 3.9%.

Zacks Rank

Orbital ATK currently carries a Zacks Rank #3 (Hold).

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