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31 Aug 07. Force Protection was the first major beneficiary of one of the Pentagon’s biggest spending sprees of the Iraq war. Now, even as talk of pulling out of Iraq grows louder, the military has been recruiting other, bigger contractors to help with production. General Dynamics Corp., Britain’s BAE Systems PLC, Oshkosh Truck Corp. and Navistar International Corp. are some of the other players threatening Force Protection’s dominant market position. Demand for these heavy-duty vehicles to protect American forces has driven a handful of military contractors’ stock prices skyward, but heightened competition and share-price volatility should make investors cautious about betting on Force Protection. At $17.14 on the Nasdaq Stock Market yesterday, the shares are 45% below their 52-week high of $31.16 in May, giving the company a market value of $1.1bn. The stock fell as low as $13.96 earlier this month. Since November, the Defense Department has awarded almost $4bn in MRAP contracts to about a dozen vendors. While Force Protection, in a joint venture with General Dynamics, has won about $1.1bn with its main MRAP — called the Cougar — Navistar isn’t far behind with $1.05bn, according to Thomas Weisel Partners LLC research. BAE Systems has about $809m, and General Dynamics alone has about $350m. The Cougar’s market share has fallen from 100% since November to 20% in one size category and to about 50% in another, according to Thomas Weisel. Per-vehicle costs run from $500,000 for the Cougar to $850,000 for a 23-ton Buffalo. The shares rallied recently on expectations that Congress will approve a bill soon for $147bn, allotted to military operations in Iraq and Afghanistan, including $5.3bn for MRAPs. That is on top of the $5.6bn already approved for those vehicles. Mr. Alpert says he bought the shares at about $15 and sold some when the price rose to about $28. He bought more when the price was about $18 or $19. The stock is trading at about 27 times estimated earnings in the next 12 months, according to Thomson Financial, a far higher valuation than General Dynamics’ 16 times earnings and the 10 to 12 times for other military contractors. Although the company’s second-quarter sales and earnings rose sharply on a year-over-year basis — up 140% and nearly 10 times, respectively — there are signs that growth is slowing. Second-quarter sales rose 34.4% from the first quarter, when they were up 59% from the fourth quarter of 2006.Still, some analysts and investors point out that Force Protection’s sales have been growing much faster than the 12% to 20% rate among most of its peers, justifying the higher multiple. Consensus analyst estimates project Force Protection’s earnings will rise 69% this year and 118% in 2008, according to Thomson Financial. Even if American troops do begin to withdraw from Iraq, the U.S. government still will want vehicles that can save lives in battle anywhere in the world, the company says. The company realizes the need to branch out into other products besides the original MRAP. “What a drawdown might do is give us some time and resources to address some of the various markets we haven’t spent a lot of time on,” Mr. Aldrich says. Some investors are staking their hopes on its smaller, lighter Cheetah vehicle, which they hope can succeed the Humvee as the more maneuverable joint-light tactical vehicle, or JLTV. (Source: WSJ)

04 Sep 07. Aerospace Top 100 Special Report 2007: Capacity crunch. Led by the commercial market, the aerospace industry increased its revenues and profits last year. But will aircraft production constraints put a brake on growth? Aerospace’s top 100 revenue generators grew 12% in 2006, but almost all that growth came from the commercial market, with the defence business staying essentially flat. And, as the commercial sector approaches its capacity limits, the industry’s revenue and profit growth are slowing. This is the picture that emerges from Flight Internationa

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