VEC - Vectrus (VEC) - New Contract Award
New Award. On Monday, the DoD announced Vectrus has been awarded a $43.4 million ID/IQ contract for base operations support services at Naval Station Guantanamo Bay. The maximum dollar value including the base period and four option years is $196.1 million. Back in 2018, Vectrus had been awarded a two-year $60 million contract for these services.And Extension. On August 27th, Vectrus was awarded an $116.8 million modification to its OMDAC-SWACA contract for continued support of critical operation, maintenance and defense of Army communications, which supports the Army Operational Base Communications Information Systems and infrastructure in support of U.S. Central Command forces. The extension is through February 28, 2021, although a new award of the re-competed OMDAC-SWACA is expected shortly and could impact the extension.Tempered by a Contract Loss. On the negative side of the ledger, also in late August, Vectrus lost its Turkey Spain base management contract. Similar to LOGCAP, a number of smaller contracts were rolled into one new larger contract covering U.S. Air Forces in Europe and Africa, a geographic location in which Vectrus has little presence. However, given the size of the contract, nearly $1 billion over eight years, we would not be surprised to see the contract protested.Other Key Contracts. Progress continues on LOGCAP but COVID restrictions continue to impact the transition. As mentioned, award of the key OMDAC-SWACA contract is expected shortly. Generating over $200 million of revenue in 2019, this is a significant contract for Vectrus. Loss of this contract would make attaining the $2.5 billion revenue goal in 2023 more challenging, in our view.Maintaining Outperform. We are maintaining our Outperform rating and $62 twelve month price target. Given the clearing skies around LOGCAP V, the AFACP V contract position and the ongoing momentum in Vectrus's other businesses, we believe the Company's future prospects have become much brighter, once the pandemic passes.Read More >>