Truist Securities has initiated coverage on Amentum Holdings Inc. (NYSE: AMTM) with a Buy rating and set a price target of $31.00.
The firm sees the recent volatile trading following Amentum's Reverse Morris Trust (RMT) merger with Jacobs CMS/C&I businesses as an opportunity for investors.
According to Truist, the merger presents a chance for value creation, citing potential upside from what it views as conservative cost-saving targets and possible revenue synergies, which are not included in the company's long-term targets.
The analyst from Truist Securities believes that Amentum's current enterprise value to EBITDA (EV/EBITDA) discount of approximately 35% compared to its peers could narrow to around 20% within the next two years. This prediction is based on the expectation that the management of Amentum will build credibility over time.
Amentum's price target of $31.00 is based on a 10.4 times multiple on the firm's estimated EV/EBITDA for the calendar year 2025. This valuation represents a roughly 30% discount to the company's peers. The analyst's commentary suggests that this discount could decrease as Amentum demonstrates its ability to capitalize on the merger and achieve its cost-saving and revenue goals.
In other recent news, Amentum, a global engineering and technology solutions provider, has secured a significant contract with NASA valued at up to $256 million. This contract involves providing mission support services for NASA's Ames Research Center, focusing on the development and management of advanced technologies and scientific projects. The contract includes a two-year base period with the option for three additional one-year extensions.
In other corporate developments, Amentum has appointed Stephen A. Arnette as the new Chief Operating Officer. This executive appointment comes without any conflicting material interest, as disclosed in the company's Amendment No. 4 to the Registration Statement on Form 10.
Additionally, Amentum has expanded its stock authorization as confirmed in a recent amendment to its Certificate of Incorporation. The amendment increases the authorized shares of the company's common stock to 1 billion and executed a stock split, resulting in the total issued and outstanding shares of the company's common stock now standing at 153,280,369.
InvestingPro Insights
Amentum Holdings Inc. (NYSE:AMTM) presents an intriguing investment case, as highlighted by recent InvestingPro data and tips. The company's market capitalization stands at $6.54 billion, with a price-to-earnings ratio of 25.47, suggesting a moderate valuation relative to earnings. This aligns with Truist Securities' view that there may be room for value creation.
InvestingPro Tips reveal that Amentum holds more cash than debt on its balance sheet, which could provide financial flexibility as it integrates the Jacobs CMS/C&I businesses. Additionally, the company's liquid assets exceed short-term obligations, potentially supporting the cost-saving initiatives mentioned in the analyst's report.
However, investors should note that Amentum suffers from weak gross profit margins, with InvestingPro data showing a gross profit margin of 14.14% for the last twelve months as of Q3 2023. This underscores the importance of the cost-saving targets and potential revenue synergies highlighted by Truist Securities.
The stock's recent performance shows a 5.28% return over the past week, contrasting with a -8.84% return over the past month and year. This volatility aligns with another InvestingPro Tip indicating that the stock generally trades with high price volatility, which could present opportunities for investors as suggested by Truist's analysis.
For those seeking a more comprehensive analysis, InvestingPro offers additional tips and insights, with 7 more tips available for Amentum Holdings Inc.
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