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QinetiQ (GB:QQ)
LSE:QQ
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QinetiQ
(LSE:QQ)
Rating:63Neutral
Price Target:
5.50p
▼(-98.90%Downside)
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 Strength
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.
Negative Factors
Leadership Changes
There is uncertainty about the thinking behind leadership changes over the past four years.
Profit Expectations
QinetiQ's trading update delivered a major reset for profit expectations.
QinetiQ (QQ) vs. iShares MSCI United Kingdom ETF (EWC)
Market Cap
£2.70B
Dividend Yield177.07%
Average Volume (3M)1.47M
Price to Earnings (P/E)18.0
Beta (1Y)0.62
Revenue Growth1.02%
EPS Growth-240.44%
CountryUK
Employees8,500
SectorIndustrials
Sector Strength93
IndustryAerospace & Defense
Share Statistics
EPS (TTM)0.11
Shares Outstanding542,650,300
10 Day Avg. Volume1,138,882
30 Day Avg. Volume1,465,771
Financial Highlights & Ratios
PEG Ratio0.06
Price to Book (P/B)4.53
Price to Sales (P/S)0.00
P/FCF Ratio21.96
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
£548.78Price Target Upside9.80% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering9
QinetiQ Business Overview & Revenue Model
Company DescriptionQinetiQ Group plc operates as a science and engineering company primarily in the defense, security, and infrastructure markets in the United States, Australia, Europe, and internationally. The company operates through EMEA Services and Global Products segments. It offers advanced materials and manufacturing products; artificial intelligence, analytics, and advanced computing technologies; cyber and electromagnetic technologies; human protection and performance systems; novel systems, and weapons and effects; maritime platform, and system design and assessment products; power sources, and energy storage and distribution products; robotics and autonomy services; secure communications and navigation systems; and sensing, processing, and data fusion systems. The company also provides testing and evaluation, training and simulation, and cyber and digital resilience services, as well as unmanned air, land, and surface targets. It serves defense, aviation and aerospace, energy and utility, financial services, government, law enforcement, marine, space, and telecommunications sectors. The company was founded in 2001 and is based in Farnborough, the United Kingdom.
How the Company Makes MoneyQinetiQ generates revenue through a diverse business model that encompasses multiple streams. Primarily, the company earns money by providing technology and engineering services to defense and security sectors, which include research and development projects, testing and evaluation services, and consultancy. Additionally, QinetiQ sells specialized defense products such as surveillance systems, robotics, and cybersecurity solutions. The company also benefits from long-term contracts and partnerships with government agencies and defense organizations, which provide a stable and recurring income stream. Furthermore, QinetiQ is engaged in collaborative projects and innovation initiatives that often result in commercialized technologies and solutions, contributing to its revenue.
QinetiQ Earnings Call Summary
Earnings Call Date:May 22, 2025
(Q2-2025)
| % Change Since: 15.02%|
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
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.60
Neutral
Balance Sheet
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.65
Positive
Cash Flow
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.70
Positive
| 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
Positive
499.80
Price Trends
493.45
Positive
451.20
Positive
430.83
Positive
Market Momentum
2.95
Negative
54.13
Neutral
52.32
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GB:QQ, the sentiment is Positive. The current price of 499.8 is above the 20-day moving average (MA) of 493.94, above the 50-day MA of 493.45, and above the 200-day MA of 430.83, indicating a bullish trend. The MACD of 2.95 indicates Negative momentum. The RSI at 54.13 is Neutral, neither overbought nor oversold. The STOCH value of 52.32 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GB:QQ.
QinetiQ Peers Comparison
Overall Rating
UnderperformOutperform
Sector (67)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | £701.49M | 34.70 | 14.40% | 99.55% | 13.49% | 47.00% | |
75 Outperform | £1.46B | 37.50 | 11.62% | 143.65% | 8.00% | 674.47% | |
72 Outperform | £138.98M | 32.16 | 3.87% | 96.44% | 14.30% | -25.58% | |
72 Outperform | £628.22M | 123.90 | 4.18% | 89.40% | 14.69% | ― | |
67 Neutral | £2.85B | 10.57 | 4.69% | 213.48% | 2.73% | -20.56% | |
63 Neutral | £2.70B | 17.97 | -23.92% | 177.07% | 1.02% | -240.44% | |
| ― | $72.79B | 30.80 | 17.85% | 0.08% | ― | ― |
* Industrials Sector Average
Performance Comparison
GB:QQ
QinetiQ
499.80
44.89
9.87%
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25.06
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GB:AVG
Avingtrans
420.00
37.05
9.67%
GB:AVON
Avon Technologies
2,085.00
762.79
57.69%
GB:CHG
Chemring
543.00
156.26
40.40%
GB:CHRT
Cohort plc
1,532.00
719.15
88.47%
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.