What happened 

Shares of Target Hospitality (TH 0.76%) jumped as much as 31.7% in trading on Friday after the company announced a big increase in 2022 guidance. Shares closed the day up 25.8%. 

So what 

Management announced that 2022 revenue is now expected to be between $500 million and $510 million, and adjusted discretionary cash flow is expected to be between $320 million and $330 million. 

The big change for Target Hospitality is a government contract that has a minimum initial contract value of $575 million with the potential for more revenue for variable services. Government contracts account for about 73% of the company's expected 2022 revenue. 

Now what 

After today's increased guidance, shares still trade for under 1.5 times 2022 expected earnings and a little over three times adjusted discretionary cash flow. There are certainly headwinds like rising interest rates, but management says they have 99% of expected 2022 revenue under contract with 73% of revenue under minimum revenue commitments. This is the advantage of government contracts for Target Hospitality. 

As long as the company's revenue remains strong, this is a stock that could hold up well. Watch out for management investing too much in increasing supply, which could mean lower utilization in the future. But for now that doesn't seem like a problem given high demand.