Ahead Of The Bell: Applied Signal Technology

HARTFORD, Conn. (AP) — Applied Signal Technology Inc. could benefit from increased troop deployments to Afghanistan and a greater reliance on technology to gather intelligence, an analyst said Monday as he upgraded the manufacturer of intelligence, surveillance and reconnaissance products.

Analyst James McIlree of Collins Stewart raised his rating to "Buy" from "Hold." He has a share price target of $30 on the Sunnyvale, Calif.-based company.

Applied Signal's intelligence, surveillance and reconnaissance market is set to benefit from more troops heading to Afghanistan and a long-term trend to "push intelligence assets to the outer edges of the network," McIlree said in a client note.

The proliferation of unmanned aerial vehicles is an example of the trend, which also includes vehicles and other equipment, he said.

Applied Signal has developed wireless signal surveillance systems that can be deployed on manned and unmanned aerial vehicles and other equipment, he said.

"We expect further traction for the company this year and next," McIlree said. "The company has a rich technology portfolio and is beginning to leverage this to higher top-line growth and margins."

McIlree said he also expects Applied Signal Technology to use its cash of more than $50 million and balance sheet to complete acquisitions.

Shares of Applied Signal finished Friday's trading at $23.52.