In a report released yesterday, David Farrell from Jefferies maintained a Hold rating on QinetiQ (QQ – Research Report), with a price target of p520.00.
David Farrell has given his Hold rating due to a combination of factors affecting QinetiQ’s financial outlook. The unexpected trading update has led to anticipated downgrades in earnings forecasts for the upcoming fiscal years, primarily driven by weak order intake in the UK Intelligence and US Sectors. This has resulted in a projected decline in EBITA for FY25F and FY26F.
Additionally, the US business is facing challenges with higher-margin product sales and significant charges related to inventory and cost recovery, which are impacting margins. Although there is an expectation for margin recovery in FY26F, the organic revenue growth is predicted to fall short of the company’s high single-digit target. These issues, coupled with the need to rebuild investor confidence amidst a competitive defense sector, contribute to the Hold rating.
QQ’s price has also changed slightly for the past six months – from p446.000 to p416.200, which is a -6.68% drop .