On Thursday, RBC Capital Markets adjusted its stance on V2X, Inc. (NYSE: VVX) stock, shifting the rating from Outperform to Sector Perform. The firm also revised the price target downward to $58.00 from the previous $70.00.
This change comes as the financial institution anticipates potential challenges for the government services sector under the upcoming Trump administration. The stock currently trades at $53.11, with InvestingPro data showing four analysts have recently revised their earnings expectations downward.
The downgrade is attributed to concerns over the impact of the Department of Government Ethics (DOGE) on the company, particularly given V2X's involvement in international Department of Defense (DoD) operations. These factors are perceived as adding additional risk to V2X's business outlook, despite the company maintaining revenue growth of 7.79% and an EBITDA of $259.35 million in the last twelve months.
RBC Capital Markets acknowledges that V2X's shares are reasonably priced on a free cash flow (FCF) basis. Despite this, the firm expects that the company's flat margin projections for 2025, along with issues related to stock ownership, could constrain the stock's growth potential.
The revised price target of $58.00 is derived from applying an 8.2 times multiple to RBC's adjusted EBITDA forecast of $358 million for the year 2026. The adjustment reflects a cautious view of V2X's financial prospects in the context of the broader sector's expected dynamics.
In other recent news, aerospace and defense company V2X, Inc. reported a commendable 8% increase in third-quarter revenue, reaching $1.08 billion, and a 28% rise in adjusted EBITDA to $82.7 million.
The company's adjusted diluted EPS also jumped by 77% to $1.29. V2X also disclosed a secondary public offering of 2,500,000 shares of common stock by an existing stockholder, a transaction from which the company will not receive any proceeds.
In the realm of analyst ratings, Goldman Sachs (NYSE:GS) initiated coverage on V2X with a Sell rating, while BTIG and Truist Securities both assigned a Buy rating. Goldman Sachs expressed concerns about potential macroeconomic risks impacting V2X's revenue, while BTIG highlighted the company's potential to capitalize on increased spending on modernizing legacy military platforms.
V2X has also secured $5 billion in awards and raised its 2024 revenue guidance, despite a 22% decrease in European revenues. The company also secured a $225 million warfighter training readiness contract and expressed optimism about the transition of the F-16 cockpit upgrade contract from development to production. These are all recent developments that signify the company's commitment to growth and strategic initiatives.
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