B. Riley revisits a best idea stock from BRS Conference after strong Q3 results

B. Riley Securities analyst Jeff Van Sinderen has reiterated VSE Corporation (NASDAQ:VSEC) as a best idea from the BRS conference following the company's third-quarter earnings report. The analyst maintains a Buy rating on the stock with a price target of $265.

VSE Corporation reported third-quarter fiscal 2026 results on November 4 after market close, with a conference call scheduled for November 5 before market open. The company delivered revenue of $541.0 million and adjusted EBITDA of $107.2 million, representing year-over-year increases of 91.2% and 126.3%, respectively. These figures exceeded consensus estimates of $512.1 million in revenue and $98.7 million in adjusted EBITDA, as well as the analyst's projections of $503.1 million and $93.9 million.

The company achieved a record adjusted EBITDA margin of 19.8%, expanding 310 basis points year-over-year and 65 basis points sequentially, surpassing the analyst's estimate of 18.7%. Organic growth accelerated to approximately 17% from roughly 14% in the second quarter, driven primarily by the commercial engine aftermarket segment. Additional contributions came from a full quarter of the PAG acquisition and other recent acquisitions.

Management raised full-year fiscal 2026 guidance, now expecting revenue growth of 65% to 66.5%, up from the previous range of 61% to 64%. The company also increased its adjusted EBITDA margin guidance to 18.9% to 19.1% from 18.7% to 19.0%. Van Sinderen attributed the margin expansion to a greater mix of higher-margin engine products and repairs, synergies from earlier acquisitions, and contributions from recent deals. The company generated free cash flow of $46.6 million and reduced adjusted net leverage to approximately 2.3 times from 2.4 times in the second quarter.

VSE Corporation's August 31 acquisition of Atech, which holds repair approvals on more than 300 part numbers primarily for Pratt & Whitney Canada platforms, strengthens its proprietary content concentration, the analyst noted. The company has scheduled an investor day for December 9 that will include a multi-year outlook.