On Friday, RBC Capital Markets initiated coverage on shares of Amentum Holdings Inc. (NYSE: AMTM) with a Sector Perform rating and a price target of $24.00. Amentum Holdings, a leading government services provider, was formed through the merger of Jacobs' CMS and C&I units with the legacy Amentum. The company is recognized for its robust free cash flow (FCF), which is expected to support steady debt reduction, and possesses a significant backlog valued at $45 billion, along with exposure to growth markets.
The analyst from RBC Capital Markets noted the strengths of Amentum Holdings, including its strong free cash flow and substantial backlog, which are anticipated to contribute positively to the company's financial health and future performance. The firm's exposure to markets with growth potential was also highlighted as a positive factor.
According to InvestingPro data, the company maintains healthy liquidity with a current ratio of 1.57, though it operates with relatively thin gross margins of 9.51%. Subscribers can access 10+ additional ProTips about AMTM's financial health and growth prospects.
Despite these advantages, the analyst expressed caution regarding Amentum's growth prospects compared to its peers. The forecasted growth for fiscal year 2025 is considered below that of peer companies, and limited opportunities for margin expansion are expected to constrain near-term investor sentiment toward the stock.
Recent performance reflects these concerns, with the stock down 27.18% over the past six months, though InvestingPro data indicates analysts expect the company to return to profitability this year with projected earnings of $2.10 per share.
Moreover, the analyst pointed out that visibility into the company's operations could be affected by ongoing uncertainties surrounding the federal budget and potential policy changes under the Trump 2.0 administration.
The price target of $24 set by RBC Capital Markets is based on a nine times multiple of the firm's projected fiscal year 2026 EBITDA of approximately $1.15 billion. This valuation reflects the analyst's expectations for the company's earnings before interest, taxes, depreciation, and amortization in the coming years.
Amentum Holdings Inc. is poised to navigate the complexities of the government services sector with a solid financial foundation and potential for growth, albeit with certain challenges that may influence investor perspectives in the near term.
In other recent news, Amentum, a global engineering and technology solutions provider, has witnessed significant developments.
The company has secured various substantial contracts, including a $279 million contract from the U.S. Air Force, a $105 million contract from the U.S. Navy, and a $3 billion contract from the Department of Energy for the cleanup of the West Valley Demonstration Project in New York state. Amentum has also appointed Jennifer Walsmith as President of its Intelligence & Cybersecurity business, Darren Burton as its new Chief People Officer, and Stephen A. Arnette as the new Chief Operating Officer.
Truist Securities initiated coverage on Amentum's shares with a Buy rating, citing potential value creation following Amentum's merger with Jacobs CMS/C&I businesses. Despite beating revenue and EBITDA expectations in its first quarter as a public company, Truist expressed some skepticism due to slower bookings. However, the firm acknowledged the possibility of upside to management's synergy targets.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.