OKLAHOMA CITY -- Spartan Motors ( SPAR) keeps branching out. The Michigan-based chassis maker has now fielded a big order from BAE Systems, a rising leader in the multibillion-dollar Mine-Resistant Ambush-Protected vehicle program. Under the terms of that deal, announced Thursday, Spartan will pocket $53 million for manufacturing the chassis used in BAE's RG-33 MRAP vehicles with delivery set for the end of this year. The new BAE contract, coupled with a recent order from General Dynamics ( GD), lessens Spartan's dependence on highly touted Force Protection ( FRPT). Force Protection ranked as an early dominator of the MRAP program and, in turn, regularly sent plenty of business Spartan's way. But Force Protection has watched its market share erode this summer, as heavyweight competitors keep capturing sizable MRAP orders for themselves. While that shift originally hurt Spartan, pushing the company's stock down with Force Protection's own, it has brought new opportunities in recent weeks. "This award marks the third major MRAP-related subcontract in less than a month for Spartan Chassis," the company boasted on Thursday, "spanning three different defense contractor
s." Spartan's stock zoomed ahead on Thursday, even as stocks sold off en masse amid credit worries. Shares rose $1.38, or 11%, to $13.97. Robins Group analyst Frank Magdlen sensed a looming rise for Spartan. Late last month, as Spartan tumbled on disappointing second-quarter results, Magdlen upgraded the stock in anticipation of new MRAP-related orders.
"Will rational minds prevail?" he asked after the big sell-off. "We think so and are raising our rating to strong buy ... We have always believed that SPAR would receive a reasonable amount of military business." Magdlen reiterated that stand last week, when Spartan fielded an order from Force Protection's sometimes-partner General Dynamics. That $28 million order -- placed by General Dynamics alone -- calls for Spartan to build hundreds of chassis before the year even draws to a close. "SPAR continues to be a valuable subcontractor for the MRAP program," Magdlen reminded, "and has the capacity and proven capability to perform on the short timeframe for deliveries." Magdlen has an $18 price target on Spartan's shares. His firm has a long position in the stock itself. Next Generation analyst Ned Borland feels bullish about Spartan as well. "The stock has taken an absolute drubbing over the last month based on fears about Spartan's military customers' disappointing showing in the MRAP sweepstakes so far," Borland noted in late July. But "military production rates should move up significantly in the second half of the year." Like Magdlen, Borland recommends buying Spartan's stock right now. But he sees even more room for future upside and has therefore established a $25 price target on the company's shares.