On Tuesday, Leonardo DRS (NASDAQ:DRS), a defense contractor known for supplying electric drive propulsion systems for the U.S. Navy's Columbia-class submarine, received a Buy rating from BTIG with a price target set at $30.00. The new coverage highlights the company's potential for increased margins due to ongoing work on higher-priced shipsets.
Leonardo DRS's Integrated Mission Systems (IMS) segment is anticipated to see an upward shift in EBITDA margins by more than 100 basis points in the coming years. This expectation is driven by the company's current projects and their contribution to the segment's profitability.
The endorsement from BTIG comes as Leonardo DRS continues to play a significant role in the defense sector, particularly with its involvement in the Columbia-class submarine program. The company's focus on this area is expected to bolster its financial performance.
The $30.00 price target suggests a positive outlook for Leonardo DRS's stock, reflecting confidence in the company's future earnings and market position. The Buy rating indicates BTIG's belief that the stock will outperform in the market.
Investors and market watchers will be keeping an eye on Leonardo DRS's stock performance following this new analyst coverage. The company's progress on key defense contracts and the potential for margin expansion will be critical factors in achieving the anticipated growth.
In other recent news, Leonardo DRS, a defense technology company, has made significant strides in multiple areas. The firm recently secured a full-rate production contract to supply Quantum (NASDAQ:QMCO) Cascade Laser (QCL) technology for the Common Infrared Countermeasure (CIRCM) systems, which are designed to protect U.S. military aircraft from missile threats. This technology is a continuation of the firm's partnership with Northrop Grumman (NYSE:NOC).
The company also reported robust financial results for the first quarter of fiscal year 2024, with a 21% increase in revenue and a 43% rise in adjusted EBITDA. This strong performance is attributed to high demand across its portfolio, particularly in areas of advanced sensing and network computing.
In analyst news, Truist Securities raised its price target for Leonardo DRS, maintaining a Buy rating based on confidence in the company's mid-term growth and margin goals. In contrast, Morgan Stanley has given the firm an Equalweight rating, suggesting that the potential for additional growth from new contracts might already be reflected in the current stock price.
These recent developments highlight the company's strategic moves and financial growth, providing investors with a snapshot of its current standing in the defense industry.
InvestingPro Insights
The recent Buy rating and price target set by BTIG for Leonardo DRS are underscored by the company's solid financial metrics and growth prospects. With a market capitalization of $6.68 billion and a forward-looking P/E ratio of 34.51, Leonardo DRS exhibits a stable valuation in the defense industry. Notably, the company has demonstrated strong revenue growth over the last twelve months as of Q1 2024, with an impressive quarterly increase of 20.91%. This growth trajectory is further supported by a robust gross profit margin of 22.75% and an EBITDA growth of 37.45%, signaling efficient operations and the potential for future earnings expansion.
Investors monitoring the stock should consider the positive year-to-date price total return of 28.44%, which aligns with the upbeat sentiment reflected by BTIG's analysis. Additionally, the stock is trading at 95.38% of its 52-week high, indicating that it is nearing its peak market valuation. For those seeking to delve deeper into the financials and future prospects of Leonardo DRS, InvestingPro offers additional insights and tips. Currently, there are PRONEWS24 additional tips available on InvestingPro, providing a more comprehensive view for informed investment decisions.
As Leonardo DRS prepares for its next earnings date on July 31, 2024, potential investors can utilize the insights from InvestingPro to assess the company's performance against analyst expectations and market trends. With the InvestingPro Fair Value estimate at $18.64, there is a nuanced perspective on the stock's intrinsic value compared to market sentiment and analyst targets.
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