United Defense racks up contracts

United Defense Industries Inc. won a $48.2 million contract last week to upgrade armored vehicles for the U.S. Marine Corps Systems Command office.

The Arlington contractor, which repairs ships and makes naval guns and Bradley armored vehicles, will modify and apply armor to Bradleys that are bound for Taiwan, according to the contract terms.

Also this month, United Defense won a $104 million contract to produce Mod 2 Tomahawk canisters for the U.S. Navy and netted a $38.2 million contract to modify tanks for the U.S. Army.

United Defense’s stock on the New York Stock Exchange closed yesterday at $47.79, down 29 cents from Thursday’s closing price of $48.08. The markets were closed on Friday for Christmas Eve.

“It’s a nice size contract,” analyst Alex Hamilton said of the Marine Corps deal.

Mr. Hamilton, with Hartford, Conn., investment bank Advest Inc., advised investors to buy United Defense stock.

But Mr. Hamilton, along with several other analysts, have lowered their 2005 financial outlook for the company.

Earnings estimates were lowered in the recent financial quarter primarily because the company’s contracts in its joint business venture, FNSS Defense Systems Inc., are set to expire next year with no extensions.

United Defense spokesman Doug Coffey said the joint venture was only a small part of the company’s sales, though he would not say how much. The company still is invested in FNSS and is looking for business with foreign contractors, Mr. Coffey said.

Mr. Hamilton projected that United Defense would make $3.10 in diluted earnings per share this year and $2.89 in 2005. Mr. Hamilton does not own any United Defense stock, but Advest is seeking business with the company.

United Defense in its third quarter ended Sept. 30 reported a 13 percent sales jump to $573.4 million from $507.9 million last year.

Profits rose 40 percent to $52.2 million (99 cents per diluted share) from $37.4 million (71 cents) a year earlier. Diluted earnings include the value of convertible warrants and stock options.

But more fixed-price contract wins ultimately could lead to higher earnings in 2005, said Peter Arment, an analyst at Newport, R.I., equity research firm JSA Research Inc.

“Despite some significant hurdles in 2005, the growing sales opportunities coupled with stock buybacks and selective acquisitions could lead to higher [earnings] than the current 2005 consensus estimate” of $2.89 per share, Mr. Arment said.

Earlier this month, the company said it would buy EPD Container Solutions, a Berthoud, Colo., maker of specialized containers for military munitions, for an undisclosed price. The transaction, pending regulatory approvals, is expected to close sometime during next year’s first quarter.

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