Why the Electro Optic Systems (ASX:EOS) share price is up today

The Electro Optic Systems Hldg Ltd (ASX: EOS) share price is up 2% today after an update on its EM Solutions business.
The post Why the Electro Optic Systems (ASX:EOS) share price is up today appeared first on Motley Fool Australia. –

The Electro Optic Systems Hldg Ltd (ASX: EOS) share price is rising higher today after the company provided an update on its EM Solutions business.

During late-morning trade, shares in the global defence contractor are up 1.99% to $5.90.

Let’s take a look at how EM Solutions performed over the year.

EM Solutions update

Following the integration of EM Solutions into the Electro Optic Systems group, management advised of strong growth from the newly acquired business.

The Brisbane-based division recorded a successful first year under ownership, with new contract wins and significant technology development. EM Solutions achieved growth of more than 20% year-on-year in both revenue and earnings before interest and tax (EBIT).

As expected, critical supply chain components were affected by delays due to COVID-19. However, management is confident that all schedule shipments will be met before the end of the year.

For the current calendar year, EM Solutions has delivered its tri-band Cobra satellite communications terminals to the Royal Australian Navy. The upgrades were implemented on the Anzac frigates and new offshore patrol vessel programs. In November, the first series of Cobra terminals were shipped as part of a $14 million contract with three NATO navies.

In addition, EM Solutions received a $3 million order from a United States contractor supplying manpack satellite terminals. The equipment will be employed into a US defence program, and include Ka-band transceivers onto multi-layered platforms.

As a result of the new deals, EM Solutions advised it has a record confirmed order backlog of 14 month’s production. Furthermore, the company is in discussions with an overseas defence force that could see future production stretch to more than 2 years.

The company is investing strongly in research and development, using its knowledge on electromagnetics and microwaves. EM Solutions is seeking to enhance a new breed of hybrid RF-optical systems that will support forthcoming satellite systems.

What did management say?

Commenting on the efforts made to accomplish its goals, EOS Communications Systems CEO Glen Tindall said:

The team at EM Solutions have worked exceptionally hard to deliver a fantastic result, demonstrating their dedication to their clients, adding to EOS’ proprietary technology base, and maximising the synergies between EM Solutions and the broader EOS group.

As government customers continue to evolve towards multi-orbit, multi-band satellite communications, EM Solutions is uniquely positioned to deliver products that provide maximum flexibility and resilience.

We will be developing next generation satcom-on-the-move terminals that can support the optical technology that will be deployed by the EOS SpaceLink MEO Satellite Relay System.

How has the EOS share price performed?

The EOS share price suffered a setback when COVID-19 hit global logistics, restricting exports to overseas markets. Since the fall-out in March, the defence contractors’ shares have somewhat recovered but are meeting resistance around the $6 mark.

For EOS to reach back to its share price from pre-pandemic levels, supply chains constraints will have to be lifted. This will allow a steady flow of products to be delivered to international customers, thus receiving a steady flow of revenue.

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Aaron Teboneras owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the Electro Optic Systems (ASX:EOS) share price is up today appeared first on Motley Fool Australia.

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