Warfare has come a long way from bashing the other guy over the head with a club or a big rock. You don't have to be an avid watcher of Mail Call to realize that advanced electronics and surveillance have become major parts of our modern military and constitute a substantial advantage for our forces.
That's good news for Argon ST
Results for the company's fourth quarter were solid. Reported revenue rose more than 100% in the quarter, and pro forma revenue (that is, assuming that the merger between Argon and Sensytech had been in effect last year) climbed about 47%. Margins weren't quite so hot, though, as pro forma operating income rose about 17%. Nevertheless, the company met the mean analyst estimate.
Although advanced electronics are in demand, Argon ST is in a tricky spot. Nearly 90% of the fiscal year's sales came from the U.S. government, with about 69% of that coming from the Navy. That sort of dependence could be dangerous if or when Congress becomes less interested in spending money on new defense projects and/or the military prioritizes its budget away from signals intelligence and electronic warfare -- unlikely as that might seem today.
Part of this risk is highlighted by recent concerns about a stop-work order on the Aerial Common Sensor (ACS) program. Argon ST is working with Lockheed Martin
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).