Category: Aerospace and Defense

Friday, December 13, 2019

DLH Holdings Corp. (DLHC)

Well Positioned to Capitalize on Government Services Trends

DLH Holdings Corp is a provider of technology-enabled business process outsourcing and program management solutions in the United States. The company offers services to several government agencies which include the Department of veteran affairs, Department of health and human services, Department of Defense and other government agencies. It operates primarily through prime contracts and also derives its revenue from agencies of the federal government, primarily as a prime contractor but also as a subcontractor to other Federal prime contractors.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Well Positioned. With the S3 acquisition, DLH is well positioned to compete on an increasing opportunity set, in our view. DLH’s expanded core competencies dovetail nicely with key trends in the government services market, especially in DLH’s core agencies such as the Department of Veterans Affairs, Department of Health and Human Services, and public health and life sciences agencies.

Favorable End Markets. The recent Budget deal, if enacted, increases funding to DLH’s core end markets: the VA by 9.6%, DoD by 5%, and HHS by 4.4%, with even higher increases at sub agencies. The increased spending should…

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This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in the full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Thursday, December 12, 2019

DLH Holdings Corp. (DLHC)

Another Solid Quarter with Revenue Topping Expectations

DLH Holdings Corp is a provider of technology-enabled business process outsourcing and program management solutions in the United States. The company offers services to several government agencies which include the Department of veteran affairs, Department of health and human services, Department of Defense and other government agencies. It operates primarily through prime contracts and also derives its revenue from agencies of the federal government, primarily as a prime contractor but also as a subcontractor to other Federal prime contractors.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

4Q19 Results. Fourth quarter revenue came in at $54.2 million and diluted EPS was $0.12. We were at $51.3 million and $0.13, respectively. The quarterly revenue exceeded management’s preliminary October expectation. Full year revenue totaled $160.4 million and diluted EPS was $0.41. Excluding transaction-related expenses, non-GAAP EPS was $0.49 for FY2019.

Organic Growth A Positive. As expected, the majority of the year-over-year revenue growth was driven by the S3 acquisition, but DLH also delivered organic growth of approximately…

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This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in the full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Wednesday, November 6, 2019

Kratos Defense & Security (KTOS)

Another Solid Quarter But Will Continuing Resolution Hit The Pause Button?

Kratos Defense & Security Solutions is a National Security technology provider with proprietary expertise in the area of unmanned aerial vehicles, electronics for missile defense systems, electronic warfare systems, satellite control and management systems and support services for emerging naval weapon systems. Commercial and state and local government revenues are about 25% of the total and comprise primarily of critical infrastructure monitoring and protection systems.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to full report for price target, fundamental analysis and rating.

• 3Q19 Results. Kratos reported solid 3Q19 results, with quarterly revenue of $184.1 million and $20.4 million of adjusted EBITDA topping our estimates of $180 million and $17.1 million, respectively. The Unmannned segment was the driving force behind the better than expected results, with segment revenue up 37.2%.
  
• Follows Recent Additional Awards.   hursday’s announcement comes on the heels of two other unmanned awards, including a $23 million award in early August for a production run of target jet drones and a $4.8 million award in mid-August for…
  

  
  

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This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Wednesday, October 30, 2019

Comtech Telecommunications Corp. (CMTL)

A Troposcatter Win for Comtech?

Comtech Telecommunications Corp. engages in the design, development, production, and marketing of products, systems, and services for advanced communications solutions in the United States and internationally. It operates in three segments: Telecommunications Transmission, Mobile Data Communications, and RF Microwave Amplifiers. The Telecommunications Transmission segment provides satellite earth station equipment and systems, over-the-horizon microwave systems, and forward error correction technology, which are used in various commercial and government applications, including backhaul of wireless and cellular traffic, broadcasting (including HDTV), IP-based communications traffic, long distance telephony, and secure defense applications. The Mobile Data Communications segment provides mobile satellite transceivers, and computers and satellite earth station network gateways and associated installation, training, and maintenance services; supplies and operates satellite packet data networks, including arranging and providing satellite capacity; and offers microsatellites and related components. The RF Microwave Amplifiers segment designs, develops, manufactures, and markets satellite earth station traveling wave tube amplifiers (TWTA) and broadband amplifiers. Its amplifiers are used in broadcast and broadband satellite communication; defense applications, such as telecommunications systems and electronic warfare systems; and commercial applications comprising oncology treatment systems, as well as to amplify signals carrying voice, video, or data for air-to-satellite-to-ground communications. The company serves satellite systems integrators, wireless and other communication service providers, broadcasters, defense contractors, military, governments, and oil companies. Comtech markets its products through independent representatives and value-added resellers. The company was founded in 1967 and is headquartered in Melville, New York.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to full report for price target, fundamental analysis and rating.

• Marines Troposcatter Award.  Last night, the U.S. Navy announced it had awarded CubicGATR Technologies Inc. a $325 million firm-fixed-price, indefinite-delivery/indefinitequantity contract for the purchase of up to a maximum 172 Next Generation Troposcatter system manufacturing and delivery, test support, technical data delivery, logistics data delivery, training data delivery and training support, fielding support and sustainment support.
  
• Comtech’s Partner? We believe CubicGATR is Comtech’s partner in the bid. There was one other bidder, believed to be Raytheon, whom…
  
  

  
  

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This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Was the US Right in Removing Troops from Syria?

(Note: companies that
could be impacted by the content of this article are listed at the base of the
story [desktop version]. This article uses third-party references to provide a
bullish, bearish, and balanced point of view; sources are listed after the
Balanced section.)

On October 6, 2019, President Trump announced that the United States would withdraw approximately 2,000 troops from northern Syria. The decision was met by criticism from both sides of the aisle, with the House of Representatives voting 354-60 to condemn the pullout. The president has since indicated that the US will keep about 200 troops in eastern Syria to protect oil interests and that the remaining troops will move to Iraq. Shortly after the president’s announcement, Turkey launched an attack against Kurdish forces, driving them away from the Syria-Turkey border. Was the president correct in removing troops from an “endless war” in which the country has little vital interests (Bull Case) or will withdrawing troops hurt US long-term interests in the region (Bear Case)?

Wednesday, October 16, 2019

DLH Holdings Corp. (DLHC)

Announces Preliminary Results for FY19

DLH Holdings Corp is a provider of technology-enabled business process outsourcing and program management solutions in the United States. The company offer services to several government agencies which include the Department of veteran affairs, Department of health and human services, Department of defense and other government agencies. It operates primarily through prime contracts and also derives its revenue from agencies of the federal government, primarily as a prime contractor but also as a subcontractor to other Federal prime contractors.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to full report for price target, fundamental analysis and rating.

• FY19 Results.  Yesterday, DLH announced preliminary results for FY19 ended September 30th. Revenues are projected to be approximately $159 million, including $24 million from Social and Scientific Systems. This is slightly above our full year revenue estimate of $157.2 million. With 9-month revenue of $106.2 million, this implies 4Q revenue of $52.8 million.
• S3 Performing Well.   S3 appears to have had a solid 4Q generating revenue of approximately $19.5 million. Management does not comment on…
  

  
  
  

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This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Ducommun Incorporated Acquires Nobles Worldwide

Global
Leader in the Design and Manufacturing of High Performance Ammunition Handling
Systems for Military Air, Sea and Ground Platforms

SANTA ANA, Calif., Oct. 09, 2019 (GLOBE NEWSWIRE) — Ducommun Incorporated (NYSE:DCO) (“Ducommun” or the “Company”) today announced that it has completed the acquisition of Nobles Worldwide Inc. (“Nobles”) based in St. Croix Falls, Wisconsin.

Founded in 1948, Nobles Worldwide is the global leader in the design and manufacture of high performance ammunition handling systems for military aircraft, helicopters, ground vehicles and shipboard systems. Nobles is currently the primary ammunition feed chute supplier to most F-Series aircraft and naval close-in weapon systems in the U.S. and supports more than 50 different such systems in 50 other countries worldwide. In addition to its full-sized, customized solutions, Nobles offers a range of systems for small and medium caliber weapon stations and medium caliber turrets. 

“I am delighted to welcome Nobles Worldwide to Ducommun as we continue to add high value engineered products to our portfolio,” said Stephen G. Oswald, chairman, president and chief executive officer of Ducommun Incorporated. “As communicated previously, Nobles Worldwide continues to advance the Company’s strategy of offering more customized, value-driven engineered products with aftermarket support. In addition, the acquisition expands our current footprint into another segment of the defense market, ammunition delivery and handling systems.”

“We are excited to join the Ducommun family. Nobles’ focus on the design, manufacturing, delivery and integration of ammunition handling systems for military land, air and sea platforms will complement Ducommun’s existing portfolio of engineered products for the defense industry. With Ducommun, Nobles expects to accelerate its growth and expand its focus on innovative offerings to meet the needs of an evolving military,” said Will Wennberg, Nobles president.

Ducommun financed the purchase through its existing revolving credit facility.

Advisers
Winston & Strawn, LLP served as legal adviser to Ducommun and Houlihan Lokey Capital, Inc. served as financial adviser to the seller.

About Ducommun
Incorporated
Ducommun Incorporated delivers value-added innovative manufacturing solutions to customers in the aerospace, defense and industrial markets. Founded in 1849, the Company specializes in two core areas – Electronic Systems and Structural Systems – to produce complex products and components for commercial aircraft platforms, mission-critical military and space programs, and sophisticated industrial applications. For more information, visit ducommun.com.

About Nobles Worldwide
Founded in 1948, Nobles Worldwide is the largest supplier of ammunition feed systems to all branches of the U.S. military and its allies. Nobles is recognized globally for its superior durability products, cutting-edge designs and rigorous quality assurance. Nobles Worldwide offers lighter, stronger and more flexible materials used in ammunition chutes, magazines, gun mounts and weapon stations. Nobles is based in St. Croix Falls, Wisconsin. For more information, please visit noblesworldwide.com

Forward-Looking
Statements
This press release includes “forward looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, relating to the
acquisition of Nobles Worldwide, Inc. discussed above, including statements
relating to Ducommun’s expectations relating to the acquisition being complementary to its existing portfolio and Nobles accelerating its growth. We
generally use the words “believe,” “expect,” and similar expressions in this
press release to identify forward-looking statements. These statements are
based on assumptions currently believed to be valid, but they involve risks and
uncertainties that could cause our actual results to differ materially from
those expressed in the forward looking statements. Important uncertainties that
could cause our actual results to differ from those expressed in the forward
looking statements are identified in our reports filed with the SEC, including
our Quarterly Reports on Form 10-Q, our Annual Reports on Form 10-K, and our
Current Reports on Form 8-K. The forward looking statements included in this press
release are made only as of the date of this press release, and Ducommun does
not undertake any obligation to (and expressly disclaims any such obligation
to) update the forward looking statements to reflect subsequent events or
circumstances.

Contacts
Chris Wampler, Vice President, Interim CFO & Chief Accounting Officer
310.513.7290, 
CWampler@ducommun.com

Chris Witty, Investor Relations

646.438.9385, 
cwitty@darrowir.com

 

Source: GlobeNewswire (October 9, 2019 – 7:00 AM EDT)


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Wednesday, October 2, 2019

Kratos Defense & Security (KTOS)

Risk/Reward Turns Favorable. Upgrading to Outperform

Kratos Defense & Security Solutions is a National Security technology provider with proprietary expertise in the area of unmanned aerial vehicles, electronics for missile defense systems, electronic warfare systems, satellite control and management systems and support services for emerging naval weapon systems. Commercial and state and local government revenues are about 25% of the total and comprise primarily of critical infrastructure monitoring and protection systems.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to full report for price target, fundamental analysis and rating.

• Unmanned Systems Momentum Continuing.  On September 19th, Kratos reported a $35 million award from the U.S. Air Force for Air Force Subscale Aerial Target peculiar spares. The firm-fixed-price contract is expected to be completed by March 30, 2024. Combined with other recent awards for unmanned systems, we continue to see momentum building for this segment and believe the unmanned business will be a substantial value driver for the Company going forward.
• Follows Recent Additional Awards.   hursday’s announcement comes on the heels of two other unmanned awards, including a $23 million award in early August for a production run of target jet drones and a $4.8 million award in mid-August for…
  

  
  
  

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This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Wednesday, October 2, 2019

Kratos Defense & Security (KTOS)

Risk-Reward Turns Favorable. Upgrading Rating

Kratos Defense & Security Solutions is a National Security technology provider with proprietary expertise in the area of unmanned aerial vehicles, electronics for missile defense systems, electronic warfare systems, satellite control and management systems and support services for emerging naval weapon systems. Commercial and state and local government revenues are about 25% of the total and comprise primarily of critical infrastructure monitoring and protection systems.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Refer to full report for price target, fundamental analysis and rating.

• Continuing to Win Awards.  Just yesterday, Kratos announced it had received a $17.6 million sole-source award for new tactical jet drone system research, development, and initial production. Work is expected to begin immediately. The scope of work under
• Recent Russian UCAV “Loyal Wingman” Demonstration Underscores Urgency.   Last week, the Russian Defense Ministry announced the test flight of Russia’s S-70 Okhotnik-B,  or Hunter-B, flying wing unmanned combat air vehicle…
  

  
  
  

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This research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst
certification and important disclosures included in full report. 
NOTE: investment decisions should not be based upon the content of
this research summary.  Proper due diligence is required before
making any investment decision. 

Boeing 737 MAX: What’s Taking So Long?

(Note: companies that could be impacted by the content of this article are listed at the base of the story (desktop version). This article uses third-party references to provide a bullish, bearish and balanced point of view; sources listed in the “Balanced” section)

Boeing’s troubles began on October 29, 2018, when Lion Air Flight 610 experienced problems shortly after takeoff, struggled to ascend at a stable speed, and then crashed, killing all 189 passengers. Then on March 10^th, while the investigation into the Lion Air crash was still underway, Ethiopian Airlines Flight 302 experienced disturbingly similar issues leading it to crash shortly after takeoff, killing all 157 people on board. In both instances, the pilots were flying a brand-new Boeing 737 MAX.

The 737 MAX was the fastest-selling airplane in Boeing (BA) history with about 5,000 orders from more than 100 customers worldwide. The model has completed thousands of successful flights and was widely considered by industry experts to be a safe aircraft. Nevertheless, following the crash of Flight 302, the US Federal Aviation Administration (FAA) moved to temporarily ground the entire global fleet of Boeing 737 MAX aircrafts.

Now, about a year after the first crash, half a year after its “temporary” grounding, and after thousands of canceled flights, the plane has yet to return to the skies. Originally, the company had hoped the aircraft model could return to service as soon as April. However, concerns regarding not only the plane itself, but also Boeing’s and the FAA’s approval processes has delayed the 737 MAX’s return to service. Currently, an international panel of air-safety regulators is finishing a report that is expected to criticize the FAA’s certification process. International regulators speculate that the FAA’s delegation of the assessment of certain flight-control features to Boeing and inadequate data sharing with foreign authorities during its certification likely contributed to the tragic events. Varying opinions on technical and procedural standards between international agencies has now spiraled into political and diplomatic clashes. The seemingly endless number of obstacles to the re-certification of the aircraft inspires the question, “Will the 737 MAX ever return to the sky?”

Directed Energy Weapons: Star Wars Redux?

Recent tests of prototype directed energy weapons (DEW) have made it clear that this form of weaponry has moved beyond just a theoretical concept. Although lasers were first demonstrated in 1960, advances in a wide range of science disciplines have allowed various forms of DEWs to be refined for both civilian and military uses. Weapons classified as DEWs include high energy lasers, electromagnetic railguns, and radio frequency weapons such as high-power microwaves and ultra-wideband weapons. So how close are we to the deployment of DEWs and what is driving the development of such weapons? Are the latest class of DEWs real or is this a Star Wars redux?

How Will Rising Trade Tensions
Impact the Aerospace Industry?

Last July, US President Donald Trump imposed a large number of tariffs on China, hoping to strike up a deal for better trade practices. So far, the US has implemented tariffs on $250 billion of Chinese products and China has responded with about $185 billion on US goods. At this point, neither side is willing to back down, and many industries are starting to feel the effects. As trade has been the biggest sector affected, airlines are planning for lowered overall profits.