American Science & Engineering (ASEI) - Very Promising

Speaking of solid defense type companies with heavy reliance on the most lucrative customer ever know to man (the U.S. federal government) we have a stock which has had a very nice year - American Science & Engineering (ASEI).

American Science and Engineering, Inc. (AS&E) is the leading worldwide supplier of innovative X-ray inspection systems. With 50 years of experience in developing advanced X-ray security systems, the Company’s product line utilizes a combination of technologies, including patented Z Backscatter technology, Radioactive Threat Detection (RTD), high energy transmission and dual energy transmission X-ray. These technologies offer superior X-ray threat detection for plastic explosives, plastic weapons, liquid explosives, dirty bombs and nuclear devices. AS&E’s complete range of products include cargo inspection systems for port and border security, baggage screening systems for facility and aviation security, and personnel and passenger screening systems. AS&E systems protect high-threat facilities and help combat terrorism and trade fraud, drug smuggling, weapon smuggling, and illegal immigration and people smuggling. AS&E customers include leading government agencies, border authorities, military bases, airports and corporations worldwide, including the U.S. Department of Homeland Security (DHS), U.S. Department of Defense (DoD), U.S. Customs and Border Protection (CBP), North Atlantic Treaty Organization (NATO), HM Revenue & Customs (U.K.), Hong Kong Customs, and Abu Dhabi Customs. For more information on AS&E products and technologies, please visit www.as-e.com.

I almost bought this yesterday as the stock has pulled back to its 50 day moving average, and tested it intraday for a week straight. Today, it seems to have bounced off it nicely and could be setting up for a new run...

Readers have pointed this stock out to me in the past, but I have not had a lot of time to really delve into the name. Analysts have estimates of $3.10 for the year ending March 2009 and $3.55 for March 2010 so it also is in that range of 20x forward earnings. This is a nice smaller sized ($600M market cap) defense oriented name which reported a very solid quarter, has very little debt, even spits off dividends, and once again - that customer base. 30% of sales are also recurring for maintenance of systems which is a big bonus.

• The Company reported record revenues of $56,293,000 as compared with revenues of $37,627,000 for the second quarter of fiscal year 2008, net income of $7,361,000 as compared with net income of $4,515,000 for the second quarter of fiscal year 2008, and earnings per share of $0.83 as compared with earnings per share of $0.48 for the second quarter of fiscal year 2008. This represents a 50% increase in revenues and a $0.35 increase in earnings per share when compared to the second quarter of the prior fiscal year.
• The Company reported $93.5 million in bookings for the second quarter of fiscal year 2009 versus $55.6 million in the second quarter of the prior fiscal year.
  
• Backlog at September 30, 2008 increased 61% to a record $197 million as compared to the prior year.
• “Bookings for the quarter increased 68% with $93.5 million in new orders reflecting the continued strength of our Z Backscatter Van™ (ZBV™) for force protection, counter-drug and anti-terrorism applications,” Fabiano said. “Additionally, the on-going focus on international markets resulted in robust ZBV bookings for emerging sales territories. AS&E’s proprietary Z Backscatter continues to achieve market recognition as a premier technology to detect explosives, drugs and other contraband. Moreover, our Field Service business reported record bookings, reflecting our increased installed base and high level of customer satisfaction.
• In accordance with the previously announced dividend program, the Company is declaring a quarterly cash dividend of $0.20 per share, payable on December 4, 2008 to the holders of record at the close of business on November 17, 2008.

Here is a recent blurb from Investors Business Daily

• U.S. Customs and Border Protection announced in October that it had installed American Science & Engineering's (NasdaqGS:ASEI - News) Z-Portal vehicle screening system at the San Ysidro checkpoint.
  
• The Billerica, Mass., company specializes in X-ray inspection systems that promote border security, fight terrorism, and combat drug and weapons smuggling, illegal immigration and trade fraud. Its systems are used by governments and corporations around the world.
• The portal is the only multiview, drive-through screening system available to scan cars, vans and their cargo for concealed threats and contraband. It uses the Z Backscatter technology that American Science has built its business around, protected by more than 20 patents. The Z-Portal's technology delivers a much clearer image of low-density objects that may be hidden in car fenders, tires, trunks and gas tanks, or under the hood. It emits extremely low dosages of radiation, making it safe for operators, drivers and the environment.
• "The international community has spent more than the U.S. on port and border security," said Brian Ruttenbur, an analyst at Morgan Keegan. "However, we are starting to see a shift in focus away from airport passenger screening to detection of cargo at ports and borders."
• Customs and Border Protection will study how the first portal system performs at San Ysidro, but the agency already expects more to be deployed in the future because they make the process more efficient and effective. "This apparent approval opens the door to additional orders for Z-Portal systems that carry ticket prices that are believed to be in excess of $2 million," said Stifel Nicolaus analyst Stephen Levenson. The U.S. has roughly 60 border crossings with Canada and nearly 40 along the border with Mexico. This presents the potential for deployment of several hundred Z-Portals domestically over a multiyear period, Levenson says.
• American Science's Z Backscatter technology reveals items that traditional X-rays cannot, attracting an elite class of clientele that includes the Department of Defense, Homeland Security and customs, as well as other federal agencies and foreign governments.
• The company also makes smaller systems that screen people entering airports and government buildings. In 2007, American Science's SmartCheck personnel screening system was awarded a $10.8 million contract by the Transportation Security Administration.
• American Science's screening systems require servicing, which provides the company with a recurring revenue stream. That stream accounts for about 30% of total sales. Inspection systems generate 67% of sales, while contract research and development and parcel products make up the rest.
• "If you listen to the president-elect, homeland security spending will be a high priority, and defense spending won't change significantly for the next couple of years," Ruttenbur said. (President Elect Midas will not want to be seen weak on homeland defense - he has an election to win in 4 years)

No position but very interested