Industrials Archives - Page 4 of 57

CoreCivic, Inc. (CXW) – A Solid End to 2024

Posted on February 11, 2025February 11, 2025 by cpereira@noblefcm.com

Tuesday, February 11, 2025

CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for nearly 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.

Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

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

A Solid End to the Year. CoreCivic posted solid 4Q24 results, especially given the facility closures from earlier in the year. Results for the quarter surpassed internal as well as consensus estimates, resulting from both cost management initiatives and increased occupancy, which reached 75.5% of available capacity, the Company’s highest level since the first quarter of 2020.

4Q24 Results. Revenue of $479.3 million compared to $491.2 million in 4Q24. We were at $463 million, and the consensus was $465 million. Adjusted EBITDA totaled $74.2 million compared to $90 million in 4Q24. We were at $65.2 million, and the consensus was $66.3 million. Adjusted diluted EPS of $0.16, versus $0.23 last year. We and consensus were at $0.10.

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

Graham Corp. (GHM) – A Transition At The Top

Posted on February 7, 2025February 7, 2025 by cpereira@noblefcm.com

Friday, February 07, 2025

Graham Corporation designs, manufactures and sells critical equipment for the energy, defense and chemical/petrochemical industries. The Company designs and manufactures custom-engineered ejectors, vacuum pumping systems, surface condensers and vacuum systems. It is a nuclear code accredited fabrication and specialty machining company. It supplies components used inside reactor vessels and outside containment vessels of nuclear power facilities. Its equipment is found in applications, such as metal refining, pulp and paper processing, water heating, refrigeration, desalination, food processing, pharmaceutical, heating, ventilating and air conditioning. For the defense industry, its equipment is used in nuclear propulsion power systems for the United States Navy. The Company’s products are used in a range of industrial process applications in energy markets, including petroleum refining, defense, chemical and petrochemical processing, power generation/alternative energy and other.

Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

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

A Transition. Yesterday, Graham Corporation announced its current President and CEO, Daniel Thoren, will transition to the role of Executive Chairman, effective June 10, 2025. Matthew J. Malone, current Vice President and General Manager for Graham subsidiary Barber-Nichols, will be appointed to President & COO effective February 2025 and is expected to assume the CEO role of Graham Corporation in June 2025. The transition is part of an established succession plan.

Malone Background. Mr. Malone brings over 15 years of engineering and executive experience to his new role as President and Chief Operating Officer. Mr. Malone joined Barber-Nichols in 2015 as a Project Engineer focused on rocket engine turbopump design and development. He was promoted to Navy Program Manager in 2018, overseeing key U.S. Navy programs, and was appointed Vice President of Operations at Barber-Nichols in 2020 and then General Manager in 2021.

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This Company Sponsored 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.

EuroDry (EDRY) – Rating Lowered to Market Perform, Awaiting an Improvement in Time Charter Rates

Posted on February 7, 2025February 7, 2025 by cpereira@noblefcm.com

Friday, February 07, 2025

EuroDry Ltd. was formed on January 8, 2018 under the laws of the Republic of the Marshall Islands to consolidate the drybulk fleet of Euroseas Ltd. into a separate listed public company. EuroDry was spun-off from Euroseas Ltd. on May 30, 2018; it trades on the NASDAQ Capital Market under the ticker EDRY. EuroDry operates in the dry cargo, drybulk shipping market. EuroDry’s operations are managed by Eurobulk Ltd., an ISO 9001:2008 and ISO 14001:2004 certified affiliated ship management company and Eurobulk (Far East) Ltd. Inc., which are responsible for the day- to-day commercial and technical management and operations of the vessels. EuroDry employs its vessels on spot and period charters and under pool agreements.

Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.

Hans Baldau, Research Associate, Noble Capital Markets, Inc.

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

Sale of M/V Tasos. EuroDry Ltd. recently agreed to sell the M/V Tasos, a vessel built in 2000, for ~$5 million. The vessel is expected to be scrapped and recycled and will be delivered to its buyer between mid-February and mid-March 2025. Eurodry expects to book a gain of approximately $2.1 million. Following the sale of the M/V Tasos, Eurodry will have a fleet of 12 vessels with total cargo capacity of 843,402 dwt. Upon delivery of two Ultramax vessels in 2027, the fleet will consist of 14 vessels with total cargo capacity of 970,402 dwt.

Market environment. Charter rates have continued to decline due, in part, to a weak outlook for the economy in China, which accounts for a large portion of dry bulk trade, and previous route disruptions that have largely abated. The Panama Canal has returned to full capacity, further undermining dry bulk rates. Recent U.S. tariffs imposed on imports from China could also weigh on its economy. While higher scrapping rates and more stringent environmental regulations could constrain the available bulker fleet, we are not optimistic that rates will make a significant recovery in 2025 despite a historically low industry order book.

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

DLH Holdings (DLHC) – Transition Ongoing

Posted on February 7, 2025February 7, 2025 by cpereira@noblefcm.com

Friday, February 07, 2025

DLH delivers improved health and readiness solutions for federal programs through research, development, and innovative care processes. The Company’s experts in public health, performance evaluation, and health operations solve the complex problems faced by civilian and military customers alike, leveraging digital transformation, artificial intelligence, advanced analytics, cloud-based applications, telehealth systems, and more. With over 2,300 employees dedicated to the idea that “Your Mission is Our Passion,” DLH brings a unique combination of government sector experience, proven methodology, and unwavering commitment to public health to improve the lives of millions. For more information, visit www.DLHcorp.com.

Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

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

Revenue Decline. 1Q25 y-o-y lower revenue was driven by the unbundling of contracts to small business set-asides, which negatively impacted revenue by $3.5 million, $1.5 million from the winding down of acquired small business contracts, another $1.5 million from winding down of international business, and roughly $2 million of HHS revenue that was pushed out into the second quarter of 2025.

Strong Pipeline. DLH’s pipeline remains strong with over $4.0 billion of new business opportunities. For fiscal year 2025, management identified 13 opportunities worth a total of $700 million. The Company is focused on opportunities that leverage DLH’s digital transformation, cyber security, research and development, and systems engineering capabilities.

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

DLH Holdings (DLHC) – A Peek into the First Quarter Results

Posted on February 6, 2025February 6, 2025 by cpereira@noblefcm.com

Thursday, February 06, 2025

Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

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

1Q Results. Revenue for the quarter was $90.8 million, below our estimate of $97 million and last year’s revenue of $97.9 million. Net income totaled $1.1 million, or diluted EPS of $0.08, compared to $2.2 million or $0.15 in the prior year. EBITDA was $9.9 million compared to $11.1 million last year and is in line with our estimate of $10 million.

Year-Over-Year Impact. Management indicated several factors impacted the year-over-year comparison of its TPS platform. For example, during the first quarter, one of the Company’s recompetes was awarded to a small business. This resulted from the prior administration’s Executive Order to unbundle contracts during the recompete cycle and reserve portions for small businesses. Additionally, acquired contracts that were won as a small business transitioned in the latter quarters of 2024, and other small, non-strategic projects were winding down or fully completed.

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

AZZ Inc. (AZZ) – AZZ Provides Fiscal Year 2026 Guidance, No Change to Our Estimates

Posted on February 6, 2025February 6, 2025 by cpereira@noblefcm.com

Thursday, February 06, 2025

Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.

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

A market leader with a strong growth profile. AZZ is the leading independent provider of hot dip galvanizing and coil coating solutions to a broad range of end markets. We expect AZZ Precoat Metals’ new manufacturing facility in Washington, Missouri to contribute to top-line growth in fiscal year 2026 while capital expenditures decline. Approximately 75% of the facility’s production is already committed and could generate roughly $50 million to $60 million in revenue on an annualized basis once production is fully ramped.

Fiscal 2026 corporate guidance. AZZ Inc. released financial guidance for fiscal year 2026 and expects sales in the range of $1.625 billion to $1.725 billion, adjusted EBITDA in the range of $360 million to $400 million, and adjusted diluted EPS of $5.50 to $6.10. Fiscal year 2026 guidance includes an increase in the Metal Coatings EBITDA margin expectations to a range of 27% to 32% from 25% to 30%, while Precoat Metals EBITDA margin expectations are unchanged at 17% to 22%.

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

Euroseas (ESEA) – Updating Estimates Due to Two New Time Charters

Posted on February 4, 2025February 4, 2025 by cpereira@noblefcm.com

Tuesday, February 04, 2025

Euroseas Ltd. was formed on May 5, 2005 under the laws of the Republic of the Marshall Islands to consolidate the ship owning interests of the Pittas family of Athens, Greece, which has been in the shipping business over the past 140 years. Euroseas trades on the NASDAQ Capital Market under the ticker ESEA. Euroseas operates in the container shipping market. Euroseas’ operations are managed by Eurobulk Ltd., an ISO 9001:2008 and ISO 14001:2004 certified affiliated ship management company, which is responsible for the day-to-day commercial and technical management and operations of the vessels. Euroseas employs its vessels on spot and period charters and through pool arrangements.

Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.

Hans Baldau, Research Associate, Noble Capital Markets, Inc.

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

New time charter contracts. Euroseas executed two new time charter contracts for M/V Synergy Antwerp and M/V Synergy Keelung. The charter contracts are at gross daily rates of $35,500 for a minimum period of 36 months and a maximum period of 39 months at the charterer’s option. Both contracts will take effect at the completion of the vessels’ respective current charters; M/V Synergy Antwerp’s new charter is expected to commence in May 2025, and M/V Synergy Keelung’s new charter is expected to commence in June 2025.

Favorable rates and improved coverage. The new time charters are expected to contribute roughly $57.0 million in EBITDA during the minimum contracted period. The new charters improve the company’s 2025 and 2026 charter coverage to 82% and 45%, respectively. Additionally, Euroseas announced that M/V Synergy Keelung will be retrofitted with energy-saving devices (ESDs) and the upgrade costs will be shared with the charterer.

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

FreightCar America (RAIL) – Taking the Long View

Posted on February 3, 2025February 3, 2025 by slightbourne@noblecapitalmarkets.com

Monday, February 03, 2025

Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.

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

Tariffs. Pursuant to the International Emergency Economic Powers Act, the Trump Administration is implementing a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. The tariffs are effective on February 4. Energy resources from Canada will have a lower 10% tariff. The action is intended to hold Mexico, Canada, and Mexico accountable for their promises of halting illegal immigration and preventing fentanyl and other drugs from entering the United States. The ad valorem duties do not appear to consider the origin of raw materials or to be subject to exemption.

Exposure. In 2021, FreightCar moved its manufacturing activities in the United States to a new state-of-the-art facility in Castanos, Mexico. It steadily grew production capacity to 5,000 rail cars per year with the addition of a fourth production line during the fourth quarter of 2023. Importantly, the company’s competitors, Greenbrier Companies (NYSE-GBX) and Trinity Industries (NYSE-TRN), also have significant manufacturing operations in Mexico that serve the U.S. market.

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

Release – Kelly Announces Fourth-Quarter and Full-Year 2024 Conference Call

Posted on January 30, 2025January 30, 2025 by dburczyk@noblecapitalmarkets.com

Research News and Market Data on KELYA

TROY, Mich., Jan. 30, 2025 (GLOBE NEWSWIRE) — Kelly, a leading global specialty talent solutions provider, will release its fourth-quarter and full-year earnings before the market opens on Thursday, February 13, 2025. In conjunction with its earnings release, Kelly will publish a financial presentation and host a live webcast of a conference call with financial analysts at 9 a.m. ET on February 13 to review the results from the quarter and answer questions.

The presentation and a link to the live webcast will be accessible through the Company’s public website on the Investor Relations page under Events & Presentations. The webcast will be recorded, and a replay will be available within one hour of completion of the event through the same link as the live webcast.

About Kelly

Kelly Services, Inc. (Nasdaq: KELYA, KELYB) helps companies recruit and manage skilled workers and helps job seekers find great work. Since inventing the staffing industry in 1946, we have become experts in the many industries and local and global markets we serve. With a network of suppliers and partners around the world, we connect more than 500,000 people with work every year. Our suite of outsourcing and consulting services ensures companies have the people they need, when and where they are needed most. Headquartered in Troy, Michigan, we empower businesses and individuals to access limitless opportunities in industries such as science, engineering, technology, education, manufacturing, retail, finance, and energy. Revenue in 2023 was $4.8 billion. Learn more at kellyservices.com.

KLYA-FIN

Analyst & Media Contact:
Scott Thomas
(248) 251-7264
scott.thomas@kellyservices.com

Seanergy Maritime (SHIP) – Definitive Agreements to Acquire Two New Vessels

Posted on January 29, 2025January 29, 2025 by cpereira@noblefcm.com

Wednesday, January 29, 2025

Seanergy Maritime Holdings Corp. is a prominent pure-play Capesize shipping company listed in the U.S. capital markets. Seanergy provides marine dry bulk transportation services through a modern fleet of Capesize vessels. The Company’s operating fleet consists of 18 vessels (1 Newcastlemax and 17 Capesize) with an average age of approximately 13.4 years and an aggregate cargo carrying capacity of approximately 3,236,212 dwt. Upon completion of the delivery of the previously announced Capesize vessel acquisition, the Company’s operating fleet will consist of 19 vessels (1 Newcastlemax and 18 Capesize) with an aggregate cargo carrying capacity of approximately 3,417,608 dwt. The Company is incorporated in the Marshall Islands and has executive offices in Glyfada, Greece. The Company’s common shares trade on the Nasdaq Capital Market under the symbol “SHIP”.

Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.

Hans Baldau, Research Associate, Noble Capital Markets, Inc.

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

Fleet expansion. Seanergy entered into two definitive agreements, one for purchasing a Newcastlemax vessel and the other for a bareboat charter with a purchase obligation for a Capesize vessel. The total acquisition cost is approximately $69.0 million and will be funded with cash and proceeds from credit facilities. Following the purchases, Seanergy’s fleet will consist of 21 vessels with an aggregate cargo-carrying capacity of 3,803,918 deadweight tons (dwt). Both vessels are expected to be delivered within the first quarter of 2025.

Vessel details. The Newcastlemax vessel, to be named “Meiship”, was built in 2013 and has cargo capacity of 207,851 dwt. The Capesize vessel, to be named “Blueship”, was built in 2011 and has a capacity of 178,459 dwt. Pursuant to a six-month bareboat charter, Seanergy advanced a down payment of $4.0 million and will pay an additional $4.0 million upon delivery of the vessel. Seanergy will pay the owner a daily rate of $9,750 per day during the six-month charter period and earn revenue based on the Baltic Capesize Index (BCI). At the end of the six-month charter period, Seanergy is obligated to purchase the vessel for $22.5 million.

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Release – Seanergy Maritime Expands Fleet with Two Japanese Ships: One Newcastlemax Vessel and One Capesize Vessel

Posted on January 28, 2025January 28, 2025 by dburczyk@noblecapitalmarkets.com

Research News and Market Data on SHIP

GLYFADA, Greece, Jan. 28, 2025 (GLOBE NEWSWIRE) — Seanergy Maritime Holdings Corp. (the “Company” or “Seanergy”) (NASDAQ: SHIP) announced today that it has entered into two definitive agreements with unaffiliated third parties in Japan for (i) the purchase of a Japanese-built Newcastlemax vessel and (ii) a bareboat charter with a purchase obligation for one Japanese-built Capesize vessel. The total acquisition cost is approximately $69.0 million.

Acquisition of a Japanese Newcastlemax Vessel

The Newcastlemax was built in 2013 at Imabari Shipbuilding Co., Ltd., Saijo Shipyard, a reputable Japanese shipyard, and has a cargo-carrying capacity of approximately 207,851 deadweight tons (“dwt”). The vessel will be renamed “Meiship” and is expected to be delivered within the first quarter of 2025, subject to customary closing conditions.

Acquisition of a Japanese Capesize Vessel through Bareboat Charter Agreement

The Capesize was built in 2011 at Mitsui SB and has a capacity of 178,459 dwt. Pursuant to the terms of the 6-month bareboat charter with an unaffiliated third party in Japan, Seanergy has advanced a down payment of $4.0 million and will pay an additional $4.0 million upon delivery of the vessel to the Company, as well as a daily bareboat rate of $9,750 over the charter period. The vessel will be renamed “Blueship” and is expected to be delivered within the first quarter of 2025. At the end of the 6-month bareboat period, Seanergy has an obligation to purchase the vessel for $22.5 million.

The purchase price for the two vessels is expected to be funded with a combination of cash on hand and proceeds from credit facilities the Company will seek to enter into.

Stamatis Tsantanis, the Company’s Chairman & Chief Executive Officer, stated:

“We are pleased to announce the addition of two high-quality Japanese vessels to Seanergy’s fleet, which will integrate perfectly with our existing pure-play Capesize fleet. These transactions mark a significant milestone in the Company’s strategic fleet expansion strategy, which is designed to strengthen our position within the industry. With a fully delivered fleet of 21 vessels and 3.8 million dwt, we are advancing our competitive edge through disciplined growth, in alignment with our focused capital allocation strategy.

“We expect these acquisitions to further enhance our operational capabilities while reinforcing our commitment to delivering consistent shareholder returns. We believe that the deliveries of the two new vessels are well-timed, based on the higher level of the freight futures for the second half of 2025.

“Despite the seasonal weakness, we remain confident in the long-term outlook of the Capesize sector, driven by favorable market fundamentals, a limited newbuilding orderbook, and what seems to be a sustained global demand for major raw materials.”

About Seanergy Maritime Holdings Corp.

Seanergy Maritime Holdings Corp. is an international shipping company that provides marine dry bulk transportation services through the ownership and operation of dry bulk vessels. The Company’s operating fleet consists of 19 Capesize vessels (1 Newcastlemax and 18 Capesize) with an average age of 13.8 years and aggregate cargo carrying capacity of approximately 3,417,608 dwt. Upon completion of the aforementioned transactions, the Company’s operating fleet will consist of 21 vessels (2 Newcastlemax and 19 Capesize), with an aggregate cargo carrying capacity of 3,803,918 dwt.

The Company is incorporated in the Marshall Islands and has executive offices in Glyfada, Greece. The Company’s common shares trade on the Nasdaq Capital Market under the symbol “SHIP”.

Please visit our company website at: www.seanergymaritime.com.

Forward-Looking Statements

This press release contains forward-looking statements (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events, including with respect to fleet growth, market trends and shareholder returns. Words such as “may”, “should”, “expects”, “intends”, “plans”, “believes”, “anticipates”, “hopes”, “estimates” and variations of such words and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the Company’s operating or financial results; the Company’s liquidity, including its ability to service its indebtedness; competitive factors in the market in which the Company operates; shipping industry trends, including charter rates, vessel values and factors affecting vessel supply and demand; future, pending or recent acquisitions and dispositions, business strategy, impacts of litigation, areas of possible expansion or contraction, and expected capital spending or operating expenses; risks associated with operations outside the United States; broader market impacts arising from trade disputes or war (or threatened war) or international hostilities, such as between Israel and Hamas or Iran and between Russia and Ukraine; risks associated with the length and severity of pandemics (including COVID-19), including their effects on demand for dry bulk products and the transportation thereof; and other factors listed from time to time in the Company’s filings with the SEC, including its most recent annual report on Form 20-F. The Company’s filings can be obtained free of charge on the SEC’s website at www.sec.gov. Except to the extent required by law, the Company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.

For further information please contact:

Seanergy Investor Relations
Tel: +30 213 0181 522
E-mail: ir@seanergy.gr

Capital Link, Inc.
Paul Lampoutis
230 Park Avenue Suite 1536
New York, NY 10169
Tel: (212) 661-7566
E-mail: seanergy@capitallink.com

Kratos Defense & Security (KTOS) – Raising Price Target

Posted on January 28, 2025January 28, 2025 by cpereira@noblefcm.com

Tuesday, January 28, 2025

Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and fields transformative, affordable technology, platforms, and systems for United States National Security related customers, allies, and commercial enterprises. Kratos is changing the way breakthrough technologies for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research, and streamlined development processes. At Kratos, affordability is a technology, and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training and combat systems and next generation turbo jet and turbo fan engine development. For more information go to www.kratosdefense.com.

Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

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

Raising Price Target. We are maintaining our Outperform rating but raising our price target on KTOS shares to $38 from a prior $30. KTOS shares have performed well since we raised our price target to $30 in mid-November and have spent the last two weeks above our old target. We remain positive on the growth potential for Kratos, both on the defense and commercial sides.

Drivers. We continue to believe KTOS shares benefit from investor belief in the Trump Administration’s determination to increase defense spending and allocate more dollars to areas in Kratos’ wheelhouse, such as unmanned systems, hypersonics, and space. We also expect less friction from a drawn-out continuing resolution.

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

Diversified Expands Portfolio with Strategic Maverick Natural Resources Acquisition

Posted on January 27, 2025January 27, 2025 by slightbourne@noblecapitalmarkets.com

Key Points:
– $1.275B deal creates $3.8B energy giant with doubled production
– Shifts from gas-heavy to balanced oil/gas portfolio
– 3.3x EBITDA price with $345M cash flow; EIG takes 20% stake

Diversified Energy (NYSE:DEC) made waves in the energy sector Monday with its $1.275 billion acquisition of Maverick Natural Resources, a move that signals a major shift in domestic energy production strategy and could spark further consolidation in the industry.

The deal, which combines two major players in the U.S. energy market, is set to nearly double Diversified’s revenue and significantly boost its free cash flow, according to company statements. Market observers note this could mark the beginning of a new wave of consolidation in the domestic energy sector, as companies seek to build scale and efficiency in an increasingly competitive market.

“This acquisition expands our unique and highly focused energy production company with a complementary portfolio of attractive, high-quality assets,” said Rusty Hutson, Jr., CEO of Diversified. The combined company will boast an enterprise value of approximately $3.8 billion and operate across five distinct regions, with production reaching approximately 1,200 MMcfe/d.

What’s catching investors’ attention is the deal’s attractive valuation at roughly 3.3 times LTM EBITDA, suggesting Diversified may have found value in a market where quality assets often command premium multiples. The transaction structure, including the assumption of $700 million in Maverick debt and the issuance of 21.2 million new shares, appears designed to maintain financial flexibility while expanding the company’s operational footprint.

Perhaps most significantly, the merger dramatically shifts Diversified’s production mix. While the company has historically been heavily weighted toward natural gas with about 85% of production, Maverick brings a more balanced portfolio with 55% liquids production. This diversification could prove crucial in navigating volatile energy markets.

The deal also marks a strategic entry into the coveted Permian Basin, while strengthening Diversified’s position in the Western Anadarko Basin. Industry analysts suggest this multi-basin exposure could provide valuable operational flexibility and help mitigate regional production risks.

EIG, a major energy-focused investor, will emerge as a significant stakeholder, owning approximately 20% of the outstanding shares post-merger. This backing from a sophisticated institutional investor may provide additional validation for Diversified’s growth strategy.

Looking ahead, the combined company is positioned to benefit from substantial operational synergies and improved market presence. With a projected free cash flow of $345 million, the merged entity should have ample resources to fund both growth initiatives and shareholder returns.

The transaction, expected to close in the first half of 2025, still requires shareholder approval and regulatory clearance. However, with unanimous board approval and strong strategic rationale, the deal appears well-positioned to move forward.

For investors watching the energy sector, this merger could signal a broader trend toward consolidation as companies seek to build scale and improve operational efficiency in an evolving market landscape. The success of this integration could set a template for future deals in the domestic energy sector.

Take a moment to take a look at Senior Research Analyst Mark Reichman’s Industrials and Basic Industries coverage list.