CSRA Completes NES Takeover, Sluggish View Hurts Shares
Zacks Investment Research | Jul 05, 2017 09:45PM ET
CSRA Inc. (NYSE:CSRA) recently announced that it has completed the acquisition of Alexandria-based NES Associates for approximately $105 million. This is the company’s first acquisition since it went public in Nov 2015.
At the time of announcement, Lawrence Prior, Chief Executive Officer (CEO) of CSRA stated that “NES has hands-on expertise with nearly every military base network infrastructure, both CONUS and OCONUS and this experience can directly translate to other security-sensitive customers, such as Homeland Security as well as the intelligence community.”
The acquisition will improve the CSRA’s expertise in defense telecom, infrastructure and applications architecture as well as implementation services. We believe that the tuck-in acquisition will help the company to win new contracts going forward.
Moreover, the acquisition is expected to be slightly accretive to fiscal year 2018 results. However, we don’t anticipate it to provide significant impetus to the stock price at least in the near term.
Dim View on New Business Wins Hurts Shares
Despite numerous award wins in first-half 2017, CSRA has underperformed the S&P 500. While the stock returned 0.2%, the index gained 7.8% on a year-to-date basis.
The underperformance can be attributed to the sluggish new business win rate projection – 25% versus 35% – for this fiscal. New business revenue (almost 7% of total revenue) guidance was also lower than the original fiscal 2017 guidance.
CSRA Inc. Revenue (TTM)
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