Analyst Picks and Pans: Alliant Techsystems, Cooper Tire, Cytec

Alliant Techsystems (ATK)

Jefferies & Co. maintains buy

The relatively lackluster performance of Alliant Techsystems belies the military contractor's potential and reflects investors' anxiety about NASA's plans for the Ares rocket program on which Alliant works, Howard A. Rubel of Jefferies & Co. said Sept. 21.

Alliant is pursuing "attractive opportunities in space exploration, precision munitions and composite materials that may provide for meaningful additions to growth," he said in a note to clients.

Shares have "significantly underperformed" the market and other defense contractors in recent months, primarily due to concerns over the future of Alliant's NASA business, Rubel said.

NASA spending accounts for about 20% of Alliant's revenue, he said.

"We believe these concerns are overstated and distract from the overall attractiveness of the broader enterprise," Rubel said.

Alliant's shares have underperformed though it was the only defense contractor to post a significant rise in its most recent earnings, Rubel said. And Alliant is the only mid- to large-cap defense company he covers that has had a "meaningful increase" in its earnings expectations for 2009 and next year, he said.

A presidential commission has recently suggested that alternatives to Alliant's Ares I rocket "may be better suited for NASA under its currently constrained budget authority," Rubel said.

"While no one inside of NASA, the White House or Congress has said or even suggested that the Ares I be terminated, the market already appears to be assuming this worst-case outcome," he said.

Members of Congress have "sharply contested" many of the report's findings and voiced strong support for Constellation and the Ares I programs, Rubel said.

Cooper Tire & Rubber (CTB)

Deutsche Bank raises estimates KeyBanc Capital Markets raises estimates

Analysts raised their earnings estimates on Cooper Tire & Rubber on Sept. 21, saying the tire maker stands to benefit from proposed tariffs on Chinese tires.

Deutsche Bank analyst Rod Lache raised his price target to $20.50 from $16.80 in a note to investors. He also raised his earnings estimates for the Findlay, Ohio-based tire maker over the next three years. He maintained his hold rating.

The Obama administration last week approved higher tariffs on Chinese tires, arguing they are costing the jobs of thousands of U.S. workers. Beijing has countered that the higher tariffs are a violation of free-trade rules.

Separately, KeyBanc Capital Markets analyst Saul Ludwig raised his earnings estimates on Cooper through 2010. Ludwig said tire dealers have been offering "encouraging comments" about Cooper's products and services, while manufacturing costs are falling due to plant closure savings, a new labor contract and other measures.

He argued that price increases at Cooper are "not a sure thing" and the tariff issue "bears close watching." He maintained his buy rating.

"Do not take this 'problem' to the bank just yet," he wrote of the tariff issue.

Cytec Industries ()

KeyBanc Capital Markets upgrades to buy from hold

Cytec Industries is positioned to grow on rising demand from its coatings-resins segment and long-term strength from its engineered-materials segment, said KeyBanc Capital Markets analyst Michael Sison on Sept. 21 as he upgraded the specialty chemicals maker's stock.

Sison said profits from Cytec's coatings-resins will rise given its improving cost structure and stronger demand, especially from automotive and European markets. As for the engineered materials segment, its near-terms results won't bolster growth, but its long-term outlook remains positive, given increased usage of carbon fiber in aircraft production.

Sison significantly raised his 2010 earnings estimate to $1.70 per share from $1.40 per share.

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