The KEYW Holding Corp.
) gained significant momentum following its solid first quarter
2012 results. The company's strong bookings and increased
visibility for product offerings to the private sector are also
contributing factors. This provider of cyber security and
geospatial technology solutions is a Zacks #1 Rank (Strong Buy)
with shares that have surged 29.43% over the last 90 days.
KEYW Fires On All Cylinders in 1Q
On May 1, KEYW Holding reported that first quarter earnings per
share soared to 12 cents , compared to 3 cents in the year ago
quarter. The result comprehensively beat the Zacks Consensus
Estimate of break-even.
The strong year-over-year performance was primarily driven by
robust growth in revenues and operating margin. Revenue surged
34.0% year over year to $55.8 million, primarily based on
contributions from the acquisitions of JKA Technologies (in March
2011), Forbes Analytic Software (in May 2011) and Flight Landata
(in August 2011).
This fully offset the decrease in the Air Force services business
and revenue loss related to the AURA contract, which was awarded to
a competitor in the fourth quarter of 2011 by the U.S. Government.
Most significantly, the company won $52.6 million in new bookings
during the quarter.
The gross margin expanded 450 basis points (bps) on a year over
year basis to 33.9% in the quarter, reflecting the improving
product mix. Adjusted EBITDA margin increased to 12.9% in the
quarter from 8.0% in the year-ago quarter.
Although the company did not provide any guidance for the upcoming
quarter and full year, we believe that KEYW Holding will continue
to benefit from its strong backlog, which stood at $452.0 million
(2.4X 2011 revenue) at the end of fiscal 2011.
We believe that KEYW Holding has significant growth opportunities
going forward from the incremental U.S. defense spending on cyber
security (9.1% annual growth rate through 2015) and geospatial
technologies. We believe that upcoming commercial solutions
(possibly in the first quarter of 2013) will further boost top-line
growth in the long term.
Following the results, the Zacks Consensus Estimate for 2012 went
up by a penny (12.5%) to 9 cents while the outlook for 2013
increased 3 cents (9.7%) to 34 cents.
KEYW Holding Deserves a Premium Valuation
Currently, KEYW Holding is trading at a premium to most of its
peers based on P/E, P/S and PEG. Its strong growth prospects
indicate room for further significant expansion.
KEYW Holding shares are up 30.1% over the last 6 months as compared
to a mere 3.8% increase for the S&P 500. The stock is currently
above its 50 and 200 day moving averages of 9.16 and 8.09,
Incorporated in Maryland and headquartered at Hanover, The KEYW
Holding Corp. develops cyber security and geospatial intelligence
solutions to U.S. defense organizations, intelligence and national
security agencies. KEYW Holding derived 97.0% of its fiscal 2011
revenue from the federal government.
KEYW HOLDING CP (KEYW): Free Stock Analysis
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