Deutsche Bank Sees Double-Digit EPS Growth at Orbital-ATK (OA) and Initiates Coverage at 'Buy'
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Deutsche Bank initiated coverage on Orbital-ATK (NYSE: OA) with a Buy rating and a price target of $100. Analyst Myles Walton said the stock was compelling following a recent pullback, and he anticipates 3-4% sales CAGR though 2020 and double-digit EPS growth.
"We see the stock as compelling at current levels following its most recent pullback and expect that following a release of the company's audited financial statements in the next month coupled with a successful resupply mission (and Antares return-to-flight), incremental buying will pick-up in the name," said Walton. "OA's proprietary product portfolio in the defense and space market as the result of a powerful combination of Orbital Sciences and ATK in early 2015 should provide a foundation for DD EPS growth through the end of the decade."
The analyst added, "US defense spending is starting to tick up after 7yrs of declining budgets and with 50% exposure to the US security spending, OA is in a prime position to benefit from a multi-year expansion. Similarly, the company’s 25% exposure to NASA will be an asset as that agency’s budget was also caught in the spending downdraft (but now showing 2-4% growth). The company also has 3 growth initiatives aimed at delivering a 10% boost to the top-line run-rate by 2020, which make us comfortable in a 3-4% sales CAGR though 2020, which combined with margin expansion and $150M/yr in repo get us to a DD EPS growth (with further balance sheet optionality still in the model)."
Shares of Orbital-ATK closed at $75.43 yesterday.
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