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QinetiQ Group (LSE: QQ.) shocked FTSE 250 buyers with a revenue warning on 17 March. However is it set to bounce again?
In a buying and selling replace, the defence and safety specialist lowered its full-year natural income development forecast for 2025 to about 2%. At Q3 time in January, it had instructed us to anticipate “excessive single digit natural income development“.
It sweetened the income downgrade a bit by saying “an extension to our share buyback programme of up to £200m over the following two years“.
Up and down
The QinetiQ share price fell again to… about the place it was earlier than it rose within the week or two earlier than the replace. Regardless of a little bit of volatility, it’s nonetheless up 10% over the previous 12 months.
The board clearly thinks its personal shares are value shopping for now as an excellent use of surplus money. I feel long-term buyers would possibly revenue from contemplating the identical.
Robust US enterprise
The corporate expects an impairment cost of round £140m this yr “as a result of market backdrop and operational efficiency within the US“. And there must be one-off expenses including up to round £35m-£40m, once more on account of US operations.
All of it leads analysts to foretell a loss per share for the present yr. However past this one-off yr, we could possibly be a price-to-earnings (P/E) ratio of 14.5 in 2026 and falling.
There are clear risks. However these contemplating shopping for for long-term development would possibly see the share price dip as a potential alternative.
Extra of the identical?
I’m sticking with the identical normal sector for my second decide, Chemring Group (LSE: CHG). The corporate, which specialises in decoy expertise to guard towards missiles, hasn’t actually been upset by commerce warfare threats to date.
The shares dipped on the again of FY leads to December. That’s despite the fact that we noticed an 8% rise in income and a 13% increase for the dividend. Nonetheless, underlying earnings per share (EPS) fell 4%.
Net debt jumped to £52.8m from £14.4m a yr prior. Nonetheless, a yr is a short while body for such a long-term enterprise. And Chemring nonetheless reported internet debt to underlying EBITDA of solely 0.56 occasions, which appears high quality.
The share price began 2025 weakly. However since February, it has turned again up once more. We’re a 17% year-to-date achieve in 2025.
Unsure occasions
Chemring faces a lot of the identical uncertainty and danger as QinetiQ. But it surely additionally shares the identical attraction for me — first rate long-term development prospects.
On this case, broker forecasts present EPS climbing 75% between 2024 and 2027. That could possibly be sufficient to push the P/E down underneath 14 by then. And it’s with out the short-term hurdles that QinetiQ faces this yr.
At outcomes time, CEO Michael Ord mentioned the “outlook for international defence markets is more and more sturdy, with sturdy development anticipated over the following decade“. And he spoke of an “ambition to extend the group’s annual income to c.£1bn by 2030“.
It’s obtained to be a FTSE 250 development inventory value contemplating, certainly.
