Amentum Holdings (AMTM): Is a Put Option Play Setting Up?

Amentum is a global engineering and technology solutions provider serving U.S. and allied government agencies, as well as commercial enterprises. The company offers technology-driven, full-mission lifecycle solutions spanning design, development, engineering, integration, operations, and sustainment. Amentum's target markets include energy and environmental, intelligence, space, defense, civilian, and commercial sectors. Its solutions address challenges such as energy transition, environmental remediation, digital modernization, and space superiority. Amentum differentiates itself by providing comprehensive solutions, leveraging its scale, diverse capabilities, and a highly skilled workforce. This allows the company to pursue large, complex contracts and act as a turn-key solutions provider. The company's business strategy focuses on winning and executing large government programs, penetrating existing customer relationships, expanding into high-growth markets, and applying core competencies to drive revenue synergies.

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AMTM's technical outlook is bearish. The recent price action shows a clear downtrend, with the price falling from approximately $26.00 in early August to $21.95 as of November 4th. The price is currently below its 21-day EMA ($22.78) and 50-day SMA ($23.53), indicating continued downward pressure. The 200-day SMA is 22.05, which is slightly above the current price. Momentum indicators also signal weakness. The MACD is negative (-0.47), and its signal line is also negative (-0.41), reinforcing the bearish sentiment. The RSI of 43.19 further confirms the downward trend, indicating that the stock is not yet oversold, leaving room for further declines. The Stochastic Oscillator (STOCHk) at 31.67 also points to continued weakness. Examining the Bollinger Bands, the price is trading near the lower band, suggesting the potential for a breakdown. The ROC20 is deeply negative at -15.49, highlighting significant recent underperformance. Overall, the combination of price action, moving averages, and momentum indicators points towards a continued bearish trend for AMTM over the next 1-3 months.

Amentum's MD&A presents a picture of significant growth driven by the merger with CMS. `Revenues` for the three months ended June 27, 2025, increased by 66.2% to $3,561 million compared to $2,142 million in the prior year, and for the nine months ended June 27, 2025, `Revenues` increased 69.5% to $10,468 million compared to $6,176 million. The `Cost of revenues` also increased due to this merger, but as a percentage of revenues, it decreased slightly from 90.4% to 89.7% for the three months ended and from 90.3% to 89.5% for the nine months ended. The company's backlog increased significantly to $44.6 billion, up from $26.9 billion, primarily due to the CMS merger. `Net cash provided by operating activities` increased by $113 million to $273 million for the nine months ended June 27, 2025, compared to $160 million in the prior year. The company also completed the sale of Rapid Solutions to Lockheed Martin for $360 million in cash. The company believes it is 'well positioned to continue to win new business' due to increasing demand for outsourced services, clean energy solutions, government modernization priorities, and focus on near-peer competitors. The company also made voluntary principal payments on the Term Loan of approximately $191 million and $250 million on June 27, 2025 and July 31, 2025, respectively.

Amentum's Q3 2025 earnings call projects a moderately bullish outlook. CEO John Heller expressed being 'incredibly proud of the continued momentum across the business,' citing benefits from integration and favorable global trends. The company reported revenues of $3.6 billion, up 2%, and adjusted EBITDA of $274 million, a 7% increase. They also updated guidance, reflecting underlying organic increases. CFO Travis Johnson highlighted raising full-year organic guidance, increasing revenue expectations to $13.975 billion to $14.175 billion, representing a $125 million underlying organic increase. Adjusted diluted earnings per share are also raised to $2.05 to $2.20. Bookings were strong at $3.4 billion, resulting in a book-to-bill of 1x; however, including unconsolidated joint ventures, the imputed book-to-bill was 1.8x. While the $4 billion Space Force Range Contract (SFRC) award is being protested and not included in the backlog, management remains confident in its resolution. Amentum is focused on high-growth areas like nuclear, with John Heller stating, 'Amentum isn't preparing to lead, we are leading,' indicating confidence in their market position. Overall, the company's strong performance, raised guidance, and focus on key growth areas signal a positive trajectory.

AMTM presents a mixed financial picture. Revenue has demonstrated a generally positive trend, increasing from $1,358,000,000 in Q3 2024 to $3,561,000,000 in Q3 2025. However, gross profit margins have been volatile, fluctuating from a high of 0.148 in Q3 2024 to a low of 0.049 in Q4 2024 before recovering to 0.137 in the latest quarter. Operating cash flow has seen a significant swing, moving from -$200,000,000 in Q4 2024 to $106,000,000 in Q3 2025, indicating improved short-term liquidity. Total debt has decreased substantially from $4,939,000,000 in Q4 2024 to $43,000,000 in Q3 2025, suggesting a considerable deleveraging of the balance sheet. While revenue growth and debt reduction are positive signs, the inconsistent profitability and volatility in operating cash flow warrant careful monitoring in the coming quarters.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.