RBC Capital lifts VSE Corporation stock price target to $140

On Friday, RBC Capital Markets analyst Ken Herbert updated the firm’s outlook on VSE Corporation (NASDAQ:VSEC), a leading provider of aftermarket distribution and maintenance, repair, and overhaul (MRO) services for the aerospace and defense industries. Herbert raised the price target to $140 from the previous $135, while reiterating an Outperform rating on the company’s shares. According to InvestingPro data, the stock has shown remarkable momentum, gaining over 17% in the past week and trading near $119. The company maintains strong analyst support, with multiple experts revising their earnings estimates upward for the upcoming period.

The adjustment followed VSE Corporation’s fourth-quarter earnings report, which revealed an adjusted earnings per share (EPS) of $0.90. This figure surpassed both RBC Capital’s estimate of $0.70 and the consensus estimate of $0.72. The company’s total revenue saw a significant increase of 27%, with organic growth contributing 17% to this rise. Notably, the Aviation segment reported higher-than-anticipated margins at 16.4%. InvestingPro analysis indicates the company’s strong financial position, with a current ratio of 3.69 showing ample liquidity to meet short-term obligations. However, investors should note that the stock currently trades at elevated multiples, with an EV/EBITDA ratio of 23.69.

VSE Corporation also provided guidance for the year 2025, which was more optimistic than many had anticipated. The company forecasts Aviation EBITDA margins ranging between 15.5% and 16.5%, comfortably encompassing the consensus estimates and alleviating concerns of investors who held a more negative outlook. Additionally, the guidance anticipates approximately 38% revenue growth within the Aviation segment.

Herbert’s commentary highlighted the positive aspects of the company’s performance and outlook. "The 2025 outlook calls for ~38% Aviation segment revenue growth, and the company’s ability to continue to outgrow the industry will be a positive," he noted. The analyst’s revised price target reflects confidence in VSE Corporation’s future performance, particularly in the Aviation sector, which is expected to significantly contribute to the company’s growth trajectory.

In other recent news, VSE Corporation reported strong financial results for the fourth quarter of 2024, surpassing earnings and revenue expectations. The company announced an earnings per share of $0.90, exceeding the projected $0.70, and a quarterly revenue of $299 million, which was higher than the anticipated $283.69 million. This robust performance was largely driven by a 45% revenue increase in the aviation segment, highlighting the success of VSE’s strategic focus on aviation aftermarket parts and services. Additionally, the company’s full-year revenue reached $1.1 billion, marking a 26% increase from 2023.

VSE Corporation also completed the sale of its Federal and Defense segment, and announced the divestiture of its fleet segment, Wheeler Fleet Solutions, to One Equity Partners. This move is part of VSE’s strategic transformation into a pure-play aviation aftermarket company. Analyst firms have shown interest in VSE’s growth strategies, particularly in the aviation sector, with expectations of a 35-40% revenue increase for the segment in 2025. The company is also working on integrating recent acquisitions such as Kallstrom Aerospace and Turbine Controls, which are expected to bolster its market position and drive further growth.

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