What Happened?
Shares of traffic solutions company Verra Mobility (NYSE: VRRM) jumped 3.2% in the afternoon session after the company announced a 10-year contract valued at approximately $160 million to expand its red-light and speed enforcement program with the Hawaii Department of Transportation.
This deal expanded the program across the entire state, making it the first statewide automated enforcement system in the United States. The contract increased the number of dual-enforcement camera sites from 17 to 187 across Hawaii's major islands. The significant, long-term nature of the agreement likely gave investors confidence in the company's future revenue, as it represented a major expansion of its services with a government partner.
After the initial pop the shares cooled down to $19.02, up 3.2% from previous close.
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What Is The Market Telling Us
Verra Mobility’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock dropped 12.2% on the news that the company reported mixed fourth quarter 2024 results as its EBITDA forecast came in a little shy of expectations.
Despite this, revenue increased 5% year-on-year, driven by strong demand in the Commercial Services and Government Solutions segments, with travel-related tolling activity and automated traffic enforcement programs contributing to the gains. However, the Parking Solutions segment underperformed, with a 13% revenue decline and a goodwill impairment charge, which weighed on overall profitability. Looking ahead, the company guided for 2025 revenue growth of up to 6%, with adjusted EBITDA expected to improve, though at a slower pace than analysts had hoped. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The market seemed to focus on the negatives.
Verra Mobility is down 14.8% since the beginning of the year, and at $19.02 per share, it is trading 27.3% below its 52-week high of $26.16 from February 2025. Investors who bought $1,000 worth of Verra Mobility’s shares 5 years ago would now be looking at an investment worth $1,335.
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