After a quarterly improvement in growth and profit: Is Elbit Systems stock recommended to buy?

by time news

| Liran Lublin, Director of Research Department, IBI Investment House

This morning Elbit Systems (TASE ๐Ÿ™‚ published its financial statements for 2021. The report was good and slightly above our early expectations.

Bottom line, after an improvement in growth Elbit Systems (NASDAQ ๐Ÿ™‚ also shows in the third quarter an improvement in margins that rolls to an impressive bottom line. We believe that Elbit faces other significant challenges such as improving cash flow and maintaining profitability rates against the background of the currency exchange rates operating against it. Looking ahead, during the fourth quarter Elbit released a number of contracts on a significant scale that will continue to support the company’s backlog for the coming years and we believe that the slowdown in backlog growth is spot on.

We continue to recommend Elbit with a market return recommendation and a target price of $ 142 per share.

| Main data in the report:

Revenue – The top line presented by the company was $ 1.363 billion, resulting in growth of 20.2% compared to the same quarter last year. It should be noted that Elbit contracted organically last year mainly in light of the effects of the corona crisis and in light of the positive results of the previous quarter and the company’s statements that this is not a point growth, we estimated organic growth compared to the previous quarter of 4%.

Profitability – The gross profit margin presented by Elbit in the third quarter (GAAP) was 26% similar to our earlier expectations. In NON-GAAP terms, the gross margin for the quarter was 27.2% slightly higher than our early forecast.

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The non-GAAP operating profit rate was 9%. It should be noted that this is a profit rate that has not been recorded in the company since 2019. The company’s management notes that the improved profitability rates are a result of the company’s streamlining moves.

Currency effects – As already mentioned in the previous quarter, the company hedges its currency exposure at the level of NIS 3.3 per dollar and in this sense “saved” from the effects of the appreciation of the shekel.

The net profit Elbit’s non-GAAP for the quarter was $ 103.1 million or $ 2.33 per share

The flow from activity in the quarter was due to the Achilles in the results but it would be correct to examine the parameter in an annual view that would be more representative. For the first nine months of the year, Elbit presented a cash flow from operations that stood at $ 157 million.

The company announced a dividend of $ 0.46 per share.

Accumulated orders Maintained its level from the previous quarter and stood at $ 13.6 billion with 40% of it expected to be executed in the next 5 quarters.

Sabra development and average of new orders

The author is the director of a research department at IBI Investment House and has no personal interest in the review. This review is not a substitute for investment marketing that takes into account the data and special needs of each person.

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