Force Protection Blasts It’s Way Past Estimates

Shares of defense contractor Force Protection Inc. (FRPT) are surging after-hours following a better-than-expected quarterly report.  The company, which specializes in blast- and ballistic-proof vehicles, reported quarterly profits of $0.27/share on revenue of $289 million, good for 57% and 21% year-over-year increases, respectively.  The Street had pegged FRPT at $0.22/share on revenue of $279.1 million, and the beat has shares trading up nearly 10% as of the close of after-hours trading.

FRPT is probably best known for it’s Buffalo mine-clearing vehicle, dozens of which have been sold to the Army for use in  Iraq and Afghanistan.  However, as you can see quite plainly on the chart below, shares were beaten down mercilessly after FRPT lost out on a joint-initiative with General Dynamics (GD) last Summer.  Since then, the company has embarked on an aggressive cost-cutting strategy that aims to save $40 million/year.

Apparently, the strategy is beginning to hit the bottom line, as CEO Michael Moody exclaimed that the earnings beat was, “a direct result of solid execution on our strategic initiatives throughout the organization.”  He added that the efforts, “place [FRPT] in a solid position to broaden [it’s] business by capitalizing on strategic internal and external growth opportunities.”

Shares finished up after-hours trading at $6.01, up 9.67% from the day’s close.  Shares have not traded above $6 since entering what appears to be a conventional rectangular box pattern in mid-October and have not risen above $6.30 since losing 50% of it’s market cap in one week following the loss of the aforementioned contract opportunity.  FRPT’s fundamentals are still, shall we say, ‘iffy,’ though the cost cutting initiative definitely seems to be taking hold.

If you’re looking for a trade, the buy-point here is at $6.25, or $0.10 above the first down-bar of the pattern in the weekly chart below.  If it can break out above that point tomorrow, particularly on high volume, you might be able to capture a solid short-term profit.  Just be sure to keep a careful eye on volume, as light volume is a typical indicator of a false breakout, in which case you would want to stay away.

Disclosure: No holdings in FRPT, GD.