Aug 11 (Reuters) - Shares of Force Protection Inc (FRPT.O) fell 19 percent Tuesday, a day after the defense contractor posted quarterly profit below expectations, hurt by costs that offset the impact of better-than-expected revenue during the quarter.
The company said it incurred about $8 million in costs from the M-ATV military truck competition, which it lost to rival truck maker Oshkosh (OSK.N), and manufacturing costs related to lower shipments of its Buffalo and Wolfhound vehicles.
“Costs need to come down and new growth areas need to be identified and exploited. We think this will take time to bear fruit,” Collins Stewart analyst James McIlree said in a note.
McIlree has a “hold” rating on the company.
Force Protection’s Force Dynamics venture with General Dynamics Corp (GD.N) had lost a $1.1 billion contract to supply more than 2,200 blast-resistant trucks to the U.S. Pentagon.
The company is actively undertaking a review of its relationship with General Dynamics and determining if it needs to modify the business arrangement or proceed separately, Chief Executive Michael Moody said on a conference call with analysts.
However, the company said it is working with “the prime contractor and the government” to supply its Force Armor protection kits for armored trucks, indicating that it may still obtain a portion of the M-ATV award in the form of sub-contracts.
CEO Moody said he expects to generate significant revenue from delivering more Wolfhound and Buffalo vehicles in the second half of 2009.
“In addition, the independent suspension upgrades and other support services and products are expected to generate strong revenue in the third and fourth quarters,” Moody said.
Analyst McIlree said Force Protection will generate over $550 million in sales, including independent suspension kit upgrades on the Cougar vehicle fleet which should remain a solid business for some time.
Shares of the company pared losses to trade down 93 cents at $4.13. They had touched a low of $4.05 on Nasdaq. (Reporting by Eric Yep in Bangalore; Editing by Anil D’Silva)