Stifel Initiates CSRA With Buy, $41 Price Target

Stifel's William R. Loomis initiated coverage of CSRA Inc CSRA with a Buy rating and price target of $41.

Loomis believes that the company is well positioned in the Government Services industry due to its extensive IT capabilities, robust contract portfolio, wide ranging past performance record, diversified mix across Intell, DoD and civilian agencies.

CSRA also has best in class EBITDA margins, along with a contract mix that is skewed toward fixed price work.

"We consider the shares undervalued… compared to the group average… and believe improved contract awards over the past year and this year will drive earnings higher and the stock toward our target price of $41," the analyst said.

Given the expected increase in the overall DoD spend, following the December 2015 two-year agreement, Loomis believes that the company is well positioned to compete for new awards, which in turn is expected to drive modest growth.

According to the Stifel report, "Given CSRA's portfolio of longer term fixed price contracts, and positioning as a leading Government IT contractor in critical areas like cloud, cyber security, intelligence, and health, we estimate the company has the capacity to leverage its position to grow revenue over the next few years."

CSRA reported that it won awards worth $1.8 million in the most recent quarter.