MDA will prosper under Trump 2.0, RBC says

With its third quarter results in the rear-view mirror, RBC Capital Markets analyst Ken Herbert says MDA (MDA Stock Quote, Chart, News Analysts, Financials TSX:MDA) is undervalued.

On November 15, MDA reported its Q3, 2024 results. The company posted Adjusted EBITDA of $55.5-million on revenue of $282.4-million, a topline that was up 38%, year-over-year.

“In Q3, the MDA Space team delivered another strong quarter with double digit growth in our top and bottom lines as we continued to execute and convert our backlog,” CEO Mike Greenley said. “The team continued to execute on our major programs, successfully conducting the preliminary design review for the Canadarm3 program, a critical milestone for the program. We also made significant progress on MDA CHORUS™, our next generation Earth Observation constellation, completing the spacecraft assembly and commencing spacecraft integration and testing. And in our Satellite Systems business, the team made solid progress advancing the engineering work for the Telesat Lightspeed program. In Q3, we also broke ground on our Satellite Systems facility expansion in Quebec which will add 185,000 square feet of advanced manufacturing capacity.”

As reported by the Globe and Mail, Herbert November 20 maintained his “Outperform” rating on MDA, but raised his price target on the stock from $28.00 to $30.00.

“As investors are increasingly confident in the 2025 outlook, the potential for medium- term upside in the Satellite Systems and Robotics segments is a focus,” the analyst wrote. “With a clean balance sheet, we believe the company is incrementally focused on strategic M&A and the pipeline options associated with having U.S.-based operations. MDA also sounded confident regarding its timeline for planned production capacity increases.”

Herbert says the incoming Trump administration should be no concern for the company’s activities in the U.S.

“Operationally, MDA believes that M&A activity that leads to a US presence, one that is FOCI-mitigated, could increase the pipeline for further U.S. government contracts,” he said. “Management suggested that it continues to explore a potential dual stock listing in the U.S.. Under Trump 2.0, we view having an industrial presence in the U.S. as more likely to help with incremental contract awards from the U.S. government. Management reiterated its M&A priorities as: (1) supply chain security; and (2) geographic footprint expansion. MDA sees Europe as the second-largest opportunity behind the U.S., as well as some satellite pipeline opportunities in the Middle East.”

At press time, shares of MDA were up 1.6% to $26.79.