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Orbital ATK Inc Signs 5-Year IDIQ Contract with the US Defense Department

Orbital ATK has been awarded a five-year contract to supply non-standard ammunition to the department of defense. Orbital ATK Inc. (NYSE:OA) announced that the US Department of Defense (DOD) has awarded the company with an Indefinite Delivery Indefinite Quantity (IDIQ) contract. Under the terms, it is required to deliver non-US standard ammunition (NSA) and mortar weapons systems to DOD’s international allies.

This is the second time that Orbital ATK received the NSA IDIQ order. Previously, the company had signed a $300 million worth contract for three years, which expired on December 2015. Its technical and professional expertise in this field helped it to attain this second long-term contract, which comes along with a $20 million initial award.

Orbital ATK’s Small Caliber Systems division of the Defense Systems Group VP and GM Kent Holiday stated during the signing ceremony: “Orbital ATK is pleased to continue providing non-standard ammunition to the United States Army for use in strategic geographic theaters throughout the world. The strength of our team is our worldwide supply chain that provides affordable, high-quality ammunition to our allies.”

Orbital ATK’s Steps to Involve Future Scientists

Besides getting itself engaged in achieving long-term contracts, the company has also affiliated itself with future scientist. In this regard, it participated in a three-day 4th USA Science & Engineering Festival that took place from April 15-17, 2016. In this exhibition, Orbital ATK offered the students to come and communicate with its engineers and scientists at various displays. These employees demonstrated their capabilities in Science, Technology, Engineering and Mathematics (STEM) fields.

Orbital ATK Chief Technical Officer Antonio Elias stated in this regard: “Fostering student interest and achievement in the areas of science, technology, engineering and mathematics is a part of Orbital ATK’s core values.” He further added: “This Festival is a great opportunity for students, educators and members of the community to interact with our scientists and engineers and learn about what we do at Orbital ATK and the many real-world applications of STEM.”

The visitors got an opportunity to get a hands-on experience on three displays. These include:

  • “See the World in a Different Light” – Under this display, the students were briefed on the infrared sensing technology. They were also told its different applications to the engineering segment.
  • “Fly Me to the Moon” – Under this display, the participants got the opportunity to launch rockets, under constant force with flexible payloads. The trajectory impact was shared with them practically.
  • “Special Delivery to Space” – Under this display, the participants were given a detailed overview of Orbital ATK’s Cygnus cargo delivery vehicle. They were also given a brief of what importance do sensors hold for safer delivery of clothing, food and scientific experiments to onboard astronauts.

Jefferies Stance over Orbital ATK

Jefferies believes that the company is likely to achieve $1.11 billion sales revenue target at 1QFY16 end. The firm sees a modest step up in Flight Systems due to aerospace structures, which is partially offset by Defense Systems and weakness in Defense Electronics. However, the research analyst continued to foresee some upside driven by ammunition demand.

On the other hand, the research analyst claimed that despite flat revenue, the company’s CY16 earnings per share (EPS) could advance 7% to $1.22. The core reason behind this is the upside potential in Space Systems given improved performance from Communication and National Security Satellites along with the recent success of the unmanned resupply spacecraft CRS-6 launch, which could drive program margin improvement.

The research house also took under consideration an array of notable awards that the company won during the quarter. The awards include:

  • In orbit satellite servicing award ─ Under this award, Intelsat signs a contract to become anchor customer of the new satellite life extension service. Following in-orbit tests, Orbital ATK will begin mission extension service for Intelsat starting in 2019.
  • $200 million awards over five years for the National Aeronautics and Space Administration (NASA) Sounding Rockets Operations Contract III. This program is an extension of a program that Orbital ATK has been a prime contractor on since 2010.
  • $750 million awards for Orbital ATK and Chemring Group PLC (OTCMKTS:CMGMY) for non-standard ammunition and nonstandard mortar weapon systems over the next five years. The initial funding was in the range of $17 million, but it provides a compelling avenue to market.
  • $31 million award for 120mm M1002 cartridge new production charges and training ammunition.
  • Orbital ATK was also named a major supplier for the next-generation B-21 bomber. Rejection of the B-21 protest by Boeing Co (NYSE:BA), allowed the Air Force to move forward with the project and award contracts.
  • NASA’s Commercial Resupply Services 2 (CRS2) contract ─ Under which, initially a six cargo mission order has to be delivered to the International Space Station (ISS) beginning in 2019.
  • $47 million award for the development of a solid rocket propulsion system for the Evolved Expendable Launch Vehicle (EELV) program. With options, the contract could be valued at up to $133 million.

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