Truist Securities analyst Michael Ciarmoli initiated coverage on Leonardo DRS Inc (NASDAQ:DRS) at a Buy rating with a price target of $19.
The analyst sees DRS as a compelling small and mid-cap defense company and expects it to fill the void left by recent acquisitions in the sector.
Ciarmoli is bullish on DRS’ vast exposure to next-generation systems and capabilities.
However, the analyst is cautious about management’s ability to garner benefits from RADA acquisition effectively, changes in the U.S defense spending, and the inability to win new programs.
The analyst expects DRS’ margins to expand and the company’s valuation gap to narrow over time.
Ciarmoli estimates EPS of $0.65 (in line with the consensus) for 2023 and $0.78 (below the consensus of $0.83) for 2024.
Last month, DRS reported Q1 2023 revenues of $569 million, beating the consensus of $531 million and adjusted EPS of $0.07, exceeding the consensus of $0.05.
Price Action: DRS shares are trading lower by 1.62% at $16.40 on the last check Friday.
