- The Washington Times - Monday, June 21, 2004

Analysts say ManTech International Corp., a Fairfax technology contractor, will need a few more quarters of strong earnings to regain market confidence.

ManTech in May lowered its financial outlook for the second quarter and the rest of 2004, attributing the change to unexpected costs for a fixed-price, $50 million contract with the U.S. Defense Department.

The company adjusted its second-quarter forecast on May 26 for sales between $197 million to $201 million instead of its previous estimate of $204 million to $208 million.

Shares of ManTech on the Nasdaq Stock Market plummeted 31 percent, or $8.41, on May 27 to $18.64 from $27.05 a day earlier. The stock eventually bottomed out at a one-year low of $17.58 earlier this month before rebounding. Shares closed yesterday at $19.51.

Analysts say it will take several quarters of solid profits for ManTech to boost its stock price.

While Wall Street believes the reduced estimates were solely from the increased costs of the one contract, “it wants ManTech to prove it,” said Christopher Penny, senior analyst with Arlington investment bank Friedman, Billings, Ramsey Group Inc.

Mr. Penny, who does not own any company shares, rated ManTech as outperforming the market. FBR Group has no business with ManTech.

The Defense Department contract, a three-year pact to provide security clearances for other federal agencies, is set to expire in September. The U.S. Office of Personnel Management is expected to take over security clearances this fall.

ManTech spokesman Mark Root said the company is still waiting to hear about security clearance contracts with the federal personnel agency.

Mark Jordan, a vice president for St. Louis brokerage firm A.G. Edwards & Sons Inc., advised investors to buy the stock while it is cheap.

“Except for this one nonrecurring item, the rest of the business has been doing very well,” said Mr. Jordan, who does not own any ManTech stock. A.G. Edwards has no banking relationship with the company.

ManTech last week won a $49.8 million contract from the Naval Air Warfare Center Aircraft Division to provide engineering, technical and administrative services to the U.S. Naval Air System Command’s engineering department.

But Joseph Vafi, with New York investment bank Jefferies & Co. Inc., said ManTech’s internal cash flow was lower compared with its profits and sales.

The company reported a 64 percent surge in the first quarter ended March 31 to $11.3 million (35 cents per diluted share) from $6.9 million (22 cents) a year earlier. Diluted earnings include the value of convertible warrants and stock options.

Revenue also jumped 37 percent to $202.7 million in the quarter from $148.1 million last year.

“It’s not necessarily a real negative,” but the lack of cash flow generated within the company kept his rating at a “hold,” said Mr. Vafi, managing director for equity research. Mr. Vafi does not own any ManTech stock, but Jefferies has a banking relationship with the company.

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