Orbital ATK outpaced profit forecasts for its second quarter in preliminary quarterly comparisons, but the aerospace and defense contractor took a beating on Wall Street after revealing it may have to restate up to two years of financial results.
In preliminary estimates for a three-month period ended July 3, Orbital reported a 32 percent climb in quarterly net income to $72.1 million, while its quarterly revenue fell almost 3 percent to $1.05 billion. The company’s important launch-services operations have been hampered by protracted efforts to upgrade its Antares launch vehicle following a high-profile failure of the rocket almost two years ago.
Meantime, Orbital said its results from the quarters ended June 29, 2014, through April 3, 2016, “should no longer be relied upon.” The snafu appears to stem largely from Orbital’s $2 billion-plus contract to manufacture military ammunition, after an internal review showed an inflated positive effect on the company’s top line through several reporting periods.
Orbital shares (NYSE: OA) plunged on news of the accounting woes, which circulated prior to the opening bell Aug. 10. The stock fell $17.99, or 20 percent, to close at $70.78.
CEO David Thompson put a brave face on the situation by pointing to positive in its preliminary second-quarter results.
“Orbital ATK’s second quarter was characterized by solid operational performance, excellent new orders, and strong earnings and cash flow,” Thompson said. “While the company experienced revenue softness in certain market areas (we) exceeded our initial profit margin expectations, enabling us to maintain our outlook for 2016 earnings. In addition, we continued to implement a disciplined cash deployment strategy that includes a mix of dividends, share repurchases and investments in long-term growth initiatives.”
On Aug. 3, the Orbital board awarded a dividend of 30 cents per share to be paid Sept. 22 to shareholders of record as of Sept. 7.
There was no immediate indication when final results would be posted for the second quarter, nor when the previous quarterly results might be restated.
On Aug. 9, Orbital was one of six companies chosen by NASA to design prototypes of deep-space habitats. Other companies who will divide up more than $65 million of work into 2018 include Bigelow Aerospace, Boeing, Lockheed Martin, NanoRacks and Sierra Nevada Corp.