(By Balaseshan) CIBC World Markets Inc. analyst Stephanie Price upgraded her rating on shares of COM DEV International Ltd. (TSE:CDV) to "Sector Outperformer" from "Sector Performer". The brokerage raised price target of space hardware and services provider to $3.50 from $2.75.
Price said COM DEV has had a tough couple of years, impacted by problem contracts in fiscal 2010 and declining backlog in fiscal 2011 as management became more rigorous in contract evaluation and pricing. After these setbacks, the company now appears to be hitting its stride.
The analyst said COM DEV's backlog continues to rise, with the company announcing $30 million-plus in new orders over the past two weeks and about $57 million quarter-to-date. These contracts, plus other order activity in fiscal Q3 should lead to continued strengthening in COM DEV's backlog, which was up 7% sequentially in fiscal Q2.
Gross margins have gradually been trending back into management's target range of mid-to-high 20% range. Price expects this trend to continue, with the remaining problem contract expected to ship this summer and exact-Earth forecast to be cash flow break even on a run-rate basis by the end of fiscal 2012.
Given COM DEV's improving fundamentals, the analyst believes that this discount will continue to narrow and is upgrading her rating as well as increasing her price target.
The brokerage maintained her 2012 EPS estimate of $0.23 and its 2013 estimate of $0.26.
CDV is trading up 1.44% at $2.82 on Monday.