OKLAHOMA CITY -- Force Protection's ( FRPT - Get Report) latest quarterly results -- which beat Wall Street expectations -- have given the company a much-needed lift.

The defense contractor reported late Thursday that second-quarter net income rocketed 2,170% to $9.6 million, with operating profits of 14 cents a share topping the consensus estimate by a penny, as the company ramped up production of its popular mine-resistant, ambush-protected vehicles. Second-quarter revenue, while up 140% to $135 million, did miss analyst forecasts by a full $10 million as vehicle deliveries fell a bit shy of aggressive targets. But company fans, eager for a celebration, felt pleased by the performance overall.

After plummeting in recent weeks on competitive fears, Force Protection's stock regained some lost ground on Friday. The stock, once a $30 highflier, quickly jumped 7.8% to $15.50 on the company's positive update.

Thomas Weisel Partners analyst David Gremmels, who has stuck by Force Protection throughout its recent setbacks, sees plenty of upside left.

"FRPT's stronger-than-expected margin performance and ability to quickly make up the handful of deliveries that slipped out of the second quarter increases our confidence that the company can execute on its aggressive planned production ramp while improving operating performance," Gremmels wrote late Thursday. The "long-term outlook remains strong."

Gremmels has an overweight recommendation on Force Protection's stock. His firm makes a market in the company's securities.

Gremmels portrayed Force Protection's rising margins as a real highlight of the quarter. During the latest period, Force Protection's gross profit as a percentage of sales rose to 24.3% -- up from 18.1% last year and ahead of Gremmels' 23.1% target -- as the company efficiently leveraged its fixed costs over an expanding production base. Gremmels described the improvement as "all the more outstanding" given disappointing levels of high-margin service business.

Yet even Gremmels acknowledges that Force Protection suffers from weak cash flow. Last quarter, in fact, the company suffered a cash outflow of some $71 million, as booked profits failed to translate into actual money in the bank.

But Gremmels, at least, feels no reason for alarm just yet.

"Although we are troubled by the large cash outflow, we believe the $50 million credit facility established on July 20, 2007, (to bridge the short delay in payments) and the government getting its payment system back on track will overcome any temporary cash-flow issues," he said. Meanwhile, "our long-term outlook and EPS estimates ... are unchanged."

For its part, Force Protection blamed at least a portion of the cash shortfall on "reduced performance-based payments" from its customers. At the same time, the company found itself setting aside more and more money for warranty coverage of vehicle defects. At the end of June, the company's reserves for contract liabilities had jumped to $4.4 million -- more than double the level seen at the end of last year.

Still, Force Protection itself remains quite pleased with its performance.

"The progress that we have made to date in 2007 positions us for a successful year," CEO Gordon McGilton boasted on Thursday. "We are continuing to see strong demand for our vehicles. We are also realizing the benefits of improved materials and labor costs and a reduction in our fixed costs.

"Most importantly," he concluded, "we remain committed to our mission to make vehicles that protect and save lives by making sure that those vehicles are available to our troops in a timely manner."