QinetiQ (QQ) AI Stock Analysis

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QinetiQ

(LSE:QQ)

Rating:63Neutral

Price Target:

5.50p

▼(-98.86% Downside)

The overall stock score for QinetiQ is influenced heavily by its financial performance and technical analysis. Strong revenue growth and cash flow management bolster the score, but negative profitability and increasing debt are concerns. Positive technical indicators suggest market confidence, albeit tempered by caution due to valuation concerns. The lack of earnings guidance or notable corporate events leaves these areas unaddressed in the current analysis.

Positive Factors

Contract Awards

The £110m of UK Intelligence contract awards in the quarter looks to be a decent figure, in the context of our 1H26F UK Intelligence revenue forecast of £198m.

Order Book Coverage

QinetiQ commenced the year with higher-than-usual order book cover, currently at 70% compared to an average of 62% over the past four years.

Strategic Focus

The sale aligns with the revised US Strategy to focus on more stable and growth-oriented sectors such as maritime systems, advanced sensors, space and missile defence mission support, and persistent surveillance.

Negative Factors

Leadership Changes

There is uncertainty about the thinking behind leadership changes over the past four years.

Profit Warning

QinetiQ needs to rebuild investor confidence following March's profit warning.

Revenue Forecasts

Guidance for FY26F has been revised down from the preliminary steer that came with March's profit warning.

QinetiQ (QQ) vs. iShares MSCI United Kingdom ETF (EWC)

Market Cap

£2.59B

Dividend Yield1.84%

Average Volume (3M)1.13M

Price to Earnings (P/E)18.0

Beta (1Y)0.63

Revenue Growth1.02%

EPS Growth-240.44%

CountryUK

Employees8,500

SectorIndustrials

Sector Strength85

IndustryAerospace & Defense

Share Statistics

EPS (TTM)0.11

Shares Outstanding541,571,840

10 Day Avg. Volume1,197,728

30 Day Avg. Volume1,129,466

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)0.00

Price to Sales (P/S)0.00

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

£494.45

Price Target Upside2.54% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering10

QinetiQ Business Overview & Revenue Model

Company DescriptionQinetiQ (QQ) is a British defense technology company that specializes in providing innovative solutions for defense, security, and aerospace markets. The company operates in various sectors including defense systems, cyber security, and advanced technologies, focusing on delivering high-performance products and services such as unmanned systems, simulation, and testing solutions. QinetiQ also offers consultancy and engineering services to government and commercial clients, aiding them in managing and mitigating risks in complex environments.

How the Company Makes MoneyQinetiQ generates revenue through a combination of government contracts, commercial projects, and consultancy services. A significant portion of its income comes from long-term contracts with defense ministries and security agencies, particularly in the UK and US. The company also engages in research and development projects funded by government grants and collaborations with private sector partners. Key revenue streams include the sale of advanced technology systems, maintenance of defense equipment, and cyber security services. Partnerships with major defense contractors and technology firms further enhance QinetiQ's capabilities and market reach, contributing positively to its financial performance.

QinetiQ Earnings Call Summary

Earnings Call Date:May 22, 2025

(Q2-2025)

% Change Since: 10.97%|

Next Earnings Date:Nov 13, 2025

Earnings Call Sentiment Positive

The earnings call highlights strong financial performance, significant contract wins, and robust growth opportunities, particularly in the U.S. and Europe. However, challenges such as potential impacts from U.S. continuing resolutions, flat backlog, and uncertainty in the U.K. defense sector are noted. Despite these challenges, the positive aspects significantly outweigh the negatives, indicating a strong position for future growth.

Q2-2025 Updates

Positive Updates

Strong Financial Performance

The company secured more than GBP 1 billion of orders with a book-to-bill ratio of 1.3. Revenue increased by 7% and operating profit rose by 7%, maintaining a stable margin of 11.3%. Underlying basic earnings per share increased by 6%.

Significant Contracts and Growth Opportunities

Notable contracts include a 10-year EUR 284 million contract for Aerial Training Services in Germany, a 3-year GBP 150 million contract for British Army communications, and significant growth in the U.S. with a new Aerial Target Systems contract.

Strong Cash Flow and Shareholder Returns

Cash conversion was strong at 84%, with leverage at 0.6x. The company extended its GBP 100 million share buyback program by a further GBP 50 million and maintained a 7% dividend growth.

Strategic Growth and Pipeline

The company's pipeline is robust, with opportunities worth more than GBP 15 billion. Significant pipeline opportunities include the U.K. long-term partner agreement extension and the U.S. Tethered Aerostat Radar System program in Poland.

Negative Updates

Challenges with U.S. Continuing Resolutions

Continuing resolutions in the U.S. could potentially impact revenue predictability, although the company has planned for this disruption in their guidance.

Flat Backlog and Impact of Exchange Rates

Backlog remained flat versus FY '24 at GBP 2.9 billion, and a stronger dollar provided a headwind to reported growth rates of about 0.5% for revenue and profit.

Uncertainty in U.K. Defense and Intelligence Sector

The ongoing defense review and change in government in the U.K. have led to some slowdown in the intelligence business, though the impact is considered a short-term disruption.

Company Guidance

During the QinetiQ FY '25 interim results call, management highlighted several key financial metrics and strategic initiatives. The company delivered a 7% increase in revenue, reaching GBP 947 million, with a book-to-bill ratio of 1.3, and secured over GBP 1 billion in orders. Operating profit rose by 7% to GBP 107 million, maintaining a stable margin of 11.3%. The group achieved good cash conversion at 84%, and leverage stood at 0.6x, excluding proceeds from the sale of Cody Technology Park. The strategy focuses on achieving GBP 2.4 billion in organic revenue with a 12% margin by FY '27, supported by a robust order backlog and a pipeline exceeding GBP 15 billion. QinetiQ announced an extension of its share buyback program by GBP 50 million and maintained a 7% dividend growth. The company remains committed to organic growth and disciplined capital allocation, with a focus on investing in people, technology, and capabilities to drive long-term sustainable growth.

QinetiQ Financial Statement Overview

Summary

QinetiQ demonstrates strong revenue growth and effective cash flow management, but recent profitability challenges reflected in negative margins indicate potential operational issues. The balance sheet is stable, yet the trajectory of increasing debt and decreasing equity ratio warrants attention. The company is positioned well within its industry, but the focus should be on improving operational efficiencies to enhance profitability.

Income Statement

Neutral

The company has shown a significant increase in revenue over the years, with a notable jump from 2022 to 2023. However, the most recent year saw a decline in EBIT and net income, resulting in negative margins. This indicates potential operational challenges or increased costs, impacting profitability.

Balance Sheet

Positive

The balance sheet reveals a stable equity base with increasing total debt. Despite the rise in debt, the company maintains a reasonable debt-to-equity ratio due to solid stockholders' equity. However, the declining equity ratio in recent years suggests a need for careful financial management to maintain stability.

Cash Flow

Positive

The company's cash flow is robust, with consistent positive operating cash flow and free cash flow generation. The free cash flow growth rate has been variable, but overall cash management appears strong, providing a buffer against potential income statement volatility.

Breakdown	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement
Total Revenue	1.93B	1.91B	1.58B	1.32B	1.28B
Gross Profit	1.93B	268.70M	229.00M	178.80M	189.90M
EBITDA	26.20M	290.90M	261.70M	183.60M	205.10M
Net Income	-185.70M	139.60M	154.40M	90.00M	121.70M
Balance Sheet
Total Assets	1.83B	2.11B	2.07B	1.76B	1.49B
Cash, Cash Equivalents and Short-Term Investments	290.60M	231.00M	156.90M	248.70M	191.00M
Total Debt	428.90M	391.80M	368.90M	22.10M	26.70M
Total Liabilities	1.20B	1.18B	1.10B	713.30M	596.90M
Stockholders Equity	626.50M	926.10M	968.30M	1.04B	889.40M
Cash Flow
Free Cash Flow	112.50M	146.80M	97.00M	104.40M	102.10M
Operating Cash Flow	221.30M	243.10M	206.00M	188.70M	181.60M
Investing Cash Flow	400.00K	-99.10M	-464.40M	-81.60M	-53.20M
Financing Cash Flow	-158.40M	-63.20M	159.70M	-47.30M	-55.60M

QinetiQ Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price482.20

Price Trends

50DMA

498.84

Negative

100DMA

453.39

Positive

200DMA

433.34

Positive

Market Momentum

MACD

-0.84

Positive

RSI

42.77

Neutral

STOCH

26.91

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:QQ, the sentiment is Neutral. The current price of 482.2 is below the 20-day moving average (MA) of 494.34, below the 50-day MA of 498.84, and above the 200-day MA of 433.34, indicating a neutral trend. The MACD of -0.84 indicates Positive momentum. The RSI at 42.77 is Neutral, neither overbought nor oversold. The STOCH value of 26.91 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for GB:QQ.

QinetiQ Peers Comparison

Overall Rating

UnderperformOutperform

Sector (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CHRT	76 Outperform	£584.26M	28.49	14.40%	1.20%	33.33%	15.05%
AVON	75 Outperform	£622.28M	122.73	4.18%	0.89%	14.69%	―
CHG	73 Outperform	£1.43B	36.74	11.62%	1.47%	8.00%	674.47%
AVG	72 Outperform	£147.25M	34.07	3.87%	0.92%	14.30%	-25.58%
BA	66 Neutral	$50.24B	26.08	17.59%	1.91%	11.60%	8.03%
Sector *	64 Neutral	$10.83B	16.50	6.52%	2.09%	2.39%	-16.50%
QQ	63 Neutral	£2.59B	17.97	-23.92%	1.84%	1.02%	-240.44%

* Industrials Sector Average

Performance Comparison

GB:QQ

QinetiQ

481.40

15.89

3.41%

GB:BA

BAE Systems

1,728.00

432.41

33.38%

GB:AVON

Avon Technologies

2,105.00

845.53

67.13%

GB:AVG

Avingtrans

445.00

69.47

18.50%

GB:CHG

Chemring

535.00

135.03

33.76%

GB:CHRT

Cohort plc

1,296.00

449.69

53.14%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jul 08, 2025