The prospect of increased military spending in the wake of last week's terrorist attacks has prompted a dramatic rise in the stock prices of some defense contractors---including Edina-based Alliant Techsystems. The company makes ammunition and precision guided munitions that may be needed as the nation goes to a war footing.
IN THE MIDST OF MONDAY'S STOCK MARKET DOWNTURN, SHARES OF ALLIANT
Techsystems jumped 23 percent. Analyst Peter Arment of New Jersey-based JSA Research says it wasn't just a knee-jerk reaction on the market's part. He thinks investors' confidence in the company is well-founded.
"The company is well positioned in ammunitions systems and ordnance, tactical systems and electronic warfare, just to mention a few. Clearly there would be additional money probably flowing through to the company over the next several months - if not years - if there's an extended conflict," Arment says.
While stocks of defense contractors in general gained, investors looked with particular favor on companies making products that might be used in the kind of high-tech, non-traditional war the United States might wage against a shadowy enemy. Alliant Techsystems' stock rose in part because it makes systems with what it terms "precision capability" for guiding bombs, artillary shells and other weaponry. But analyst Peter Arment says the company stands to benefit not just from a specific conflict, but from a generalized military buildup.
"There's also been a renewed focus on rebuilding our military forces after over a decade of declining defense budgets. I think the focus will be on shoring up our inventory levels of various munitions and various capabilities, and additional spending on such areas as missile defense, which Alliant Tech is well positioned to benefit from," says Arment.
Alliant Tech is the Army's number one supplier of rifle ammunition, and a major supplier of tank ammunition. The company also makes rocket motors that would be used if Congress approves President Bush's proposed national missile defense system. But rosy as the company's future looks, Alliant Techsystems is cautious. Spokesman Rod Bitz says the company has no plans for additional hiring, or for expanding any of its operations. He says the firm is waiting to see what happens next.
"At this early part in the process - with the military still formulating what the appropriate response would be - it's really hard for us to speculate as to what products might be called upon in the war on terrorism," Bitz says.
Alliant Techsystems was created in 1990, when Honeywell spun off its defense businesses. The company now has more than 9,000 employees in 18 states. Its Minnesota operations employ more than 900 people. About one-third of those work at a munitions plant in Arden Hills, on the site of the World War II-era Army ammunitions plant. The rest work at corporate headquarters and division offices in Edina and Hopkins, and at a testing facility in Elk River.
Bitz says many of the company's employees are veterans and retired military personel, and since the attacks last week, they've been eager to do whatever they can.
"I sense a renewed sense of pride that what we do really is important to the security of the nation, and what we do here can make a difference."
Bitz says in the wake of the World Trade Center and Pentagon attacks, the company has increased security around its plants. It has also reinstated a policy of holding the jobs and paying for the benefits of employees who are reservists called to active duty.
Alliant Techsystems' share price fell two percent Tuesday, to close at $77.10.