Moody's Investors Service, a leading credit rating agency, withdrew ManTech International Corporation's (MANT) credit rating. The repeal was subsequent to the company’s redemption of its $200 million debt on Apr 15. It has presently eliminated all debt off its balance sheet.
ManTech, a leading provider of innovative technologies and solutions for mission-critical national security programs, carried a Corporate Family Rating of Ba1, indicating substantial credit risk. The company still boasts of a conservative balance sheet and about $1 billion in funded backlog and its cash flow generation is sustained by a highly variable cost structure.
ManTech's revenues have started to feel the pressure of defense spending cuts. Due to budget sequestration, the defense services contracting business has witnessed intense price competition, leading to narrowing profit margins. Nonetheless, ManTech’s recent elimination of debt within the capital structure will dispense away its interest burden and should help uphold the bottom line.
ManTech had a Speculative Grade Liquidity rating of SGL-1, indicating very good liquidity. As of Mar 31, 2014 the company had a record cash balance of $276 million, and the debt repayment is expected to enhance cash flow generation even further. The company continues to utilize its strong cash position to fund accretive acquisitions and expand its footprint into fast-growing markets.
ManTech acquired Allied Technology Group, Inc. in the first quarter of 2014 in order to capitalize on the lucrative growth opportunities at the Department of Homeland Security (DHS). The tactical buyout will enable it to build on Allied Technology’s strong customer relationships and strategic contracts with the DHS.
On April 30, ManTech decided to acquire 7Delta, Inc., in order to establish a strong presence across the entire spectrum of federal healthcare. The acquisition will primarily be funded with cash.
The debt repayment and recent acquisitions might weigh on ManTech’s cash balance, but the company has a buffer in form of an undrawn $500 million revolving credit facility.
ManTech currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the Computer Services industry worth considering include Ebix Inc. (EBIX), Carbonite, Inc. (CARB) and Innodata Inc. (INOD). All of these stocks sport a Zacks Rank #1 (Strong Buy).