Defense Services: NatSecSvs Tracker: 2Q26 Preview

Research evidence excerpt

Defense Services: NatSecSvs Tracker: 2Q26 Preview

Lowering POs to reflect derating

AMTM: Nuclear valuations take a hit

Cutting PO to $30 – We lower our PO to $30 from $35 mainly to reflect depressed

market appetite for nuclear exposure. While the nuclear-renaissance thesis continues to

attract investors, valuations reflect the market has become less rewarding to mid to long

term execution stories.

Our $30 price objective is based on an 8.5x EV/EBITDA multiple on CY27 estimates (vs.

prior 10x). We think a multiple in line with historical multiples fairly considers AMTM’s

broad portfolio and exposure to nuclear opportunities as well as pruning out headwinds

from the recent merger.

Positioned for another strong Q of bookings – 2QFY26 boasted $4bn in net

bookings and $20bn in 1HFY26 submitted bids. We expect AMTM to enjoy another

quarter of strong bookings including a ramp in DHS, some NASA awards and strong DOE

bookings for their JVs.

Readiness spending at stake with Reconciliation bill - Last week, the House Budget

Committee unveiled a draft DOW budget resolution of $60bn, formally starting the

Reconciliation 3.0 process. The proposal comes significantly lower than the $350bn

requested by the President. We note that the reconciliation bill was expected to

meaningfully accelerate readiness, sustainment and modernization, which could have

added to AMTM’s serviceable addressable market.

Unchanged EPS estimates – We are keeping our EPS estimates at $2.45 in FY26e,

$2.90 in FY27e and $3.35 in FY28e. Higher margins at Global Engineering solutions,

were offset by lower margins at Digital solutions.

BAH: Remains pressured until growth is back

IP monetization strategy still has to be proven – We continue to see BAH as an

Underperform compared to other IT services providers.