CompaniesForce Protection stumbles

Back in February we wrote that in the economic slowdown notwithstanding, we should look for Ladson, South Carolina-based Force Protection, Inc. to do well (see 5 February 2009 HSNW). The reason: The Obama administration is moving forward on plans to withdraw U.S. troops from Iraq while increasing the number of troops in Afghanistan. In Afghanistan, as was the case in Iraq, improvised explosive devices (IEDs) pose a threat to U.S. and NATO forces. One way to protect the troops is to use Mine Resistant Ambush Protected (MRAP) to ferry them about. We updated the February piece in late July, noting that “Providing IED-resistant vehicles — Mine Resistant Ambush Protected, or MRAP — to the U.S. military is a growing business; South Carolina-based Force Protection, a manufacturer of the Cougar MRAP, upgrades the Cougar’s suspension” (29 july 2009 HSNW).

Now there is a need for another update:

• Q2 EPS $0.01 vs est $0.06
• Q2 rev $187.1 mln vs est $156.6 mln
• Shares down 8 percent

Reuters reports that defense contractor Force Protection Inc (FRPT.O) posted a lower-than-expected quarterly profit, hurt by manufacturing costs related to lower vehicle shipments, sending its shares down 8 percent. The company, in a conference call with analysts, said it is examining its relationship with General Dynamics (GD.N). “I think it is appropriate considering the disappointment from M-ATV we go back and examine that relationship and determine if proceeding in the current form is in the best interest of Force Protection,” the company said.

If some modification to that business arrangement is worthwhile, the company said it will “proceed separately”.

In June this year, Force Protection lost a $1.1 billion Afghanistan truck deal to Oshkosh Corp (OSK.N) (1 July 2009 HSNW). The contract to supply Mine Resistant Ambush Protect All Terrain Vehicles (MRAP-ATV), in a joint venture with General Dynamics, would have given a significant boost to the company’s earnings in the short term.

The company, which makes armored trucks, reported second-quarter net income of $441,000, or 1 cent a share, compared with a loss of $8.3 million, or 12 cents a share, in the year-ago quarter. Revenue fell 45 percent to $187.1 million.

Analysts on average expected the company to earn 6 cents a share, before items, on revenue of $156.6 million, according to Reuters Estimates.

Shares of the Ladson, South Carolina-based company were down 8 percent at $4.65 in trading after the bell. They closed at $5.06 Monday on NASDAQ.