After slipping into reverse this summer, Force Protection ( FRPT) is on a roll again. Force Protection's stock has been zooming forward, rising 30% over the past two weeks alone amid mounting hopes for new orders of the company's popular Mine-Resistant Ambush-Protected vehicles. With the U.S. government set to approve billions of dollars in new funding for MRAP vehicles -- and the military halting plans for a rival vehicle program -- Force Protection could soon see demand for its powerful trucks grow even stronger. While it faces stiff competition from Navistar ( NAVZ) and a new duo formed by Ceradyne ( CRDN) and Oshkosh ( OSK), Force Protection enjoys some major opportunities right now. The U.S. is currently fielding bids for so-called MRAP II vehicles, with the first orders expected to be placed as early as next month. Meanwhile, the government has delayed a high-profile Humvee-replacement program -- calling for new "Joint Light Tactical Vehicles" -- and potentially opened new doors for Force Protection in the process. "In our opinion, this move benefits FRPT in two ways," SunTrust Robinson Humphrey analyst Chris Donaghey wrote on Wednesday. "First, it likely extends the longevity of the MRAP program, which could mean MRAP production extends beyond 2008. Second, it allows more time for FRPT to complete the development of its Cheetah vehicle, see it fielded domestically and internationally and continue the spiral development process to add capabilities.
"Although Cheetah is not officially the JLTV, a delay in JLTV opens the door for FRPT to begin capturing this market well before JLTV arrives." Donaghey recommends buying Force Protection's stock, which he values at $36 a share, in anticipation of big gains. His firm has investment banking ties to the company.
For starters, Simon stressed, Ceradyne has hired a strong manager with "extensive experience in bringing vehicles from prototype to production." Meanwhile, he said, Ceradyne has already welcomed Oshkosh engineers to its own vehicle armor facility and integrated the computer design systems for both companies. Moreover, he added, Ceradyne has leased a big new production facility and started lining up suppliers to boot. "Our takeaway from the visit was very positive, as it indicated that Ceradyne has all the components in place that position it favorably for a vehicle armor award," wrote Simon, whose firm makes a market in the company's securities. "With the potential for short-term catalysts in the near future,
including the company's first major vehicle armor order, we believe Ceradyne's currently depressed stock price offers investors an attractive entry point." Thus, he stated, "we maintain our market-outperform rating and $85 target price" on the shares. Ceradyne's stock, hit by concerns about the company's body armor business this summer, fetched less than $65 a share at the time of Simon's report. But it has since recovered strongly and currently trades near the high end of its 52-week range.