VEC - Vectrus (VEC) - Operating Environment Remains Healthy Favorable Risk Reward

New Awards. Last week, Vectrus announced it had received two additional task orders under the AFCAP V $6.4 billion ID/IQ contract. The new firm-fixed price awards are valued at $40 million. These two additional task orders build on the Company's AFCAP wins that were announced in the first quarter, demonstrating Vectrus' ability to support the contingency and humanitarian requirements under AFCAP V, in our view.Iraq Now Under Vectrus. It appears operational responsibility for Iraq has finally transferred over to Vectrus under the LOGCAP V award. The worldwide pandemic slowed the transition process down substantially, but with Iraq transferred Vectrus could finally begin to realize more of the LOGCAP V award promise. We view the transition positively.Overall Operating Environment Remains Healthy. While some areas remain more restrictive than others, re-openings of bases following the pandemic is a positive for Vectrus. Increased tensions in the Asia Pacific area could enable Vectrus to expand its support of the U.S. mission in that region. While the Afghanistan business loss has already been factored into estimates, increased instability in that area could result in some U.S. presence, which may be a positive for Vectrus, although President Biden continues to call for a complete withdrawal.Favorable Risk/Reward. With VEC shares down some 36% from their March highs, we believe the shares represent a favorable risk/reward opportunity. We are maintaining our Outperform rating and $62 twelve month price target. The strong first quarter results set the table for an excellent 2021, in our view. With the recent acquisitions, Vectrus now plays in a larger pool and market trends support growth in the converged infrastructure market. Read More >>