Thursday, June 13, 2019

KeyW Holding Corporation (KEYW)

Does First Quarter Miss Matter?

KEYW Holding is a provider of mission-critical cybersecurity, cybersuperiority, and geospatial intelligence solutions to U.S. government defense, intelligence, and national security agencies. Its solution includes collection, processing, analysis, and dissemination of intelligence information in cyberspace and geospace domains. 

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

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

• Tender Offer Complete. On Wednesday, Jacobs announced that it had completed the previously announced tender offer for the outstanding shares of KeyW at a price of $11.25 per share. An aggregate of 39,928,947 KeyW shares, representing approximately 80% of the outstanding, were tendered.
• Short-Form Merger. Following the tender, Jacobs owns a sufficient number of KeyW shares to complete a…
  
  

  
  
  

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Thursday, June 13, 2019

DLH Holdings Corp. (DLHC)

How Transformative Will Social and Scientific Systems Be?

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.    

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

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

• Acquisition. On Monday, DLH announced the acquisition of Social & Scientific Systems (SSS) for $70 million. Privately-held SSS is a nationally recognized technology-enabled health research organization that collects, manages, and analyzes large-scale health data in support of critical public initiatives.
• Transformative.. SSS will immediately provide diversification for DLH, both on a revenue and end customer basis, and will broaden and deepen DLH’s… 

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Wednesday June 5, 2019

Kratos Defense & Security Solutions (KTOS)

Lowering Rating to Market Perform from Outperform on Price Appreciation

Kratos Defense & Security Solutions, Inc. provides engineering, information technology (IT) services, and warfighter solutions primarily in the United States. It operates in two segments, Kratos Government Solutions (KGS) and Public Safety and Security (PSS).     

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

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

Downgrading to Market Perform.We are lowering our rating to Market Perform from our previous Outperform as KTOS shares have topped our $20.00 12-month price target. We continue to believe in the long run potential of the Company but believe the shares may have gotten ahead of actual operating performance.

Significant Price Appreciation YTD. Since the beginning of the year, KTOS shares have appreciated 63.1%, well in excess of the Russ…

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Friday, May 17, 2019

One Stop Systems (OSS)

Files $100 Million Shelf, What This Means Moving Forward.

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

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

• Shelf Filing. Late Wednesday, One Stop Systems filed a S-3 “Shelf” registration with the SEC. The Shelf is for up to $100 million using any of common stock, preferred stock, debt, warrants, etc.
• Will Help With Liquidity, If Needed. While management is confident existing available loans and cash flows should be sufficient for the next twelve months, the Shelf provides the Company with additional funding options if business increases faster than anticip… 

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Monday, May 13, 2019

Ducommun Incorporated (DCO)

Markets Respond to a Surprisingly a Good Quarter.

Ducommun Inc is a leading global provider of engineering & manufacturing services for high-performance products & high-cost-of failure applications used primarily in the aerospace and defense, industrial, medical & other industries.   

Christian Herbosa, Research Analyst, Noble Capital Markets, Inc.

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

• Meaningful Upside Surprise. Markets responded positively to the surprisingly strong revenue growth and margin expansion reported in the Q1 earnings release last week. Revenue and diluted EPS for the quarter were $172.6 million and $0.64 representing an upside surprise of 8.65% and 44.8% above consensus estimates, respectively. 
• We’ve Come a Long Way. On a year-over-year basis first quarter revenue grew 14.7%. This top line growth reflects the strong execution of organic and inorganic growth initiatives in an expansionary industry environment. Gross, adjusted EBITDA, and operating profit margins of 20.7%, 12.6%, and 7.4% were also an improvement over last year’s Q1 margins of 17.8%, 9.6%, and 3.5%, respectively. This enhanced…
  
  

  
  
  

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Monday, May 13, 2019

Information Services Group (III)

Are Brighter Days Ahead?

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

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

• 1Q19 Results. 1Q19 results were negatively impacted by a number of items, including currency headwinds and a push out of certain business. As a results, revenues came in at $64.8 million, down 6% year-over-year, and the GAAP loss was $0.02 per share, versus breakeven a year ago. Adjusted EPS came in at $0.03, versus $0.05.
• Digital Still the Growth Driver. III continued to grow its digital services business, which represented more than 40% of 1Q19 revenue.  ISG Automation was up…
  

  
  
  

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Thursday, May 9, 2019

Kratos Defense & Security Solutions (KTOS)

Can the Beat Go On?

Kratos Defense & Security Solutions, Inc. provides engineering, information technology (IT) services, and warfighter solutions primarily in the United States. It operates in two segments, Kratos Government Solutions (KGS) and Public Safety and Security (PSS). 

   

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

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

• 1Q19 Above Expectations.  Revenue came in at $160.4 million above our $150 million estimate and management’s upper end $157 million guidance. Adjusted EBITDA totaled $17.5 million, compared to our $11.5 million estimate and management’s $11 million upper end. EPS totaled $0.03, versus our estimate of $0.01.
• Hitting on all Cylinders. Every Kratos business unit exceeded its financial forecast in the quarter. Unmanned Systems had a very successful quarter culminating in the initial Valkyrie flight. The Target drone business continu… 

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Thursday, May 9, 2019

IEC Electronics (IEC)

Can margins keep up with this organic growth machine?

IEC Electronics Corp. provides electronic manufacturing services (EMS) to technology companies in the United States. It involves in the custom manufacture of circuit cards, system level assemblies, and an array of custom cable/wire harness assemblies.

Christian Herbosa, Research Analyst, Noble Capital Markets, Inc.

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

• Delivering Consistent Organic
  Growth. During Q2, IEC generated $37.3 million of revenue for a third consecutive quarter of sequential organic growth. Revenue for the quarter modestly beat our expectations of $37.0 million and was a 17.4% increase over Q2 last year. This consistent top line growth can be attributed to the successful business development efforts initiated two years ago when the then new management team began to rebuild the sales funnel.
• Temporary Headwinds Impact Margins. Quarterly gross margins decreased to 12.3% down from 15.1% last year. Factors contributing to this decrease included: unusual tariff related costs, product mix, increased staffing, and costs related to electronic component sho… 

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Thursday, May 9, 2019

DLH Holdings Corp. (DLHC)

Will Recent Business Trends Continue to be Favorable?

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.    

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

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

• Update on 2H19. 1H19 results were somewhat constrained by a delay in RFPs as a result of the government shutdown. The pace of RFPs is picking up but it is unlikely any awards will have a material impact on 2019 results. Management remains upbeat about new awards in the second half of the year.
• Multiple Organic Growth Opportunities. DLH stands to benefit from strong budget and growth opportunities, such as a greater focus on leveraging data analysis to improve he… 

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Wednesday, May 8, 2019

Vectrus Inc. (VEC)

Can Vectrus Reach Its $2.5 Billion Revenue Goal?

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

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

• 1Q19 Results. Vectrus reported above expected revenue of $325.9 million in the first quarter, but EPS of $0.62 ($0.69 adjusted) was below expectations. We had forecast $321 million and $0.77, respectively. Vectrus saw particular strength in its European and Middle Eastern
  markets, which more than offset a weaker U.S. Higher expenses were behind the
  EPS miss.
• Backlog Remain Strong. The Company ended the quarter with $1.1 billion of funded backlog, up 60% sequentially. Book-to-bill in 1Q19 was 2.0x. Pr… 

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Wednesday, May 8, 2019

DLH Holdings Corp. (DLHC)

Are Acquisitions on the Horizon?

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.

   

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

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

• Reports 2Q19 Results. Revenue for the quarter came in at $33.8M, down slightly year-over-year, and below our $35 million estimate. EBITDA came in at $2.9 million and EPS $0.10. We were at $3.25 million and $0.13. Gross margin of 23.9% was ahead of our 23.1%, while operating margin of 6.9% was modestly below our 7.3% estimate.
• Quarterly Highlights. The y-o-y revenue decline was due primarily to the timing of workload volume on HHS contracts. The improvement in direct expense relates to decreased professional service and travel cos…

  
  

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Wednesday, May 8, 2019

KeyW Holding Corporation (KEYW)

Does First Quarter Miss Matter?

KEYW Holding is a provider of mission-critical cybersecurity, cybersuperiority, and geospatial intelligence solutions to U.S. government defense, intelligence, and national security agencies. Its solution includes collection, processing, analysis, and dissemination of intelligence information in cyberspace and geospace domains. 

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

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

• 1Q19 Results. KeyW reported revenue of $113.8 million, adjusted EBITDA of $8.8 million, and a GAAP net loss of $0.08 per share. We were at $122 million, $10.4 million, and a net loss of $0.03 per share, respectively. Revenues were anticipated to decline due to the ending of the flight services contract but a push out of certain product revenue caused the miss. Notably, these product revenues are expected to be captured in the second and third quarters.
• Business Development. First quarter awards were $87 million, with the bulk, 79%, from new business and base growth. Quarter-end backlog was flat at $1.1 billion. Trailing twelve month win rate remained relatively unchanged at 48%. The Company continues to expect several of the $100 million opportunities to be awarded over the next several quarters…
  
  

  
  
  

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Tuesday, May 7, 2019

Ducommun Incorporated (DCO)

Commercial Aerospace Still a Positive…For Now.

Ducommun Inc is a leading global provider of engineering & manufacturing services for high-performance products & high-cost-of failure applications used primarily in the aerospace and defense, industrial, medical & other industries. 

 

Christian Herbosa, Research Analyst, Noble Capital Markets, Inc.

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

• Commercial Aerospace Drives Top
  Line Beat. First quarter revenue was 14.7% higher than last year at $172.6
   million, meaningfully beating our expectations of $160 million. Commercial aerospace applications, namely the Boeing 737 platform, drove the year-over-year revenue increase contributing an additional $15.7 million more than in Q1 2018.
• Margin Enhancement Across the
  Board. Gross, adjusted EBITDA, and operating profit margins of 20.7%, 12.6%, and 3.5% were all a meaningful improvement over last year’s first quarter margins of 17.8%, 9.6%, and 3.5%, respectively. This enhanced profitability can largely be attribut… 

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