Hi there,
HRX has decimated as a result of the pandemic and despite rebounding over the past couple of months, is still a long way from its yearly highs. In the company's last quarterly update, there was improvement but revenue still dropped by 6% YOY and EPS dropped by a penny. Furthermore backlog came in at $764M, down from $772M last year as governments and companies pushed back contract awards. It was actually a decent quarter all things considered.
Assuming a gradual return to normal (although it will likely a be a new normal), HRX looks decently valued. It is trading at 22 times forward earnings and 1.41 times book value. These are inline with historical averages. Although Fiscal 2022 is expected to be better than Fiscal 2021, revenue and earnings are still expected to come in below 2020 levels. Of note HRX's fiscal years don't line up with calendar years.
On the bright side, it has signed an important multi year deal with Boeing to supply production requirements and spare parts for a handful of plane models and the defense sector continues to see strong demand. It also managed to reduce its debt load last quarter. Analysts ave a one-year price target of $17.50 which implies 25% upside.
Overall, this is a decent investment at these levels. However, the investment thesis could take a while to play out as the civil aviation segment is still under significant pressure. It'll be sometime before we get clarity on what the new normal looks like and it will continue to be a headwind for the company until there is more clarity.
Mat