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Why Is Leidos (LDOS) Down 8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Leidos (LDOS - Free Report) . Shares have lost about 8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Leidos due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Leidos Holdings Beats on Q3 Earnings, Ups 2021 EPS View
Leidos Holdings third-quarter 2021 adjusted earnings of $1.80 per share exceeded the Zacks Consensus Estimate of $1.60 by 12.5%. The bottom line also improved 22.4% from $1.47 per share registered a year ago.
The company reported GAAP earnings of $1.43 per share, which improved from the year-ago quarter’s earnings of $1.13.
Total Revenues
Leidos Holdings generated total revenues of $3,483 million in the quarter under consideration, missing the Zacks Consensus Estimate of $3,582 million by 2.8%. The top line improved 7.4% year over year. This increase in revenues is primarily attributable to growth across all its reportable segments.
Backlog
At the end of the reported quarter, the company’s total backlog was $34.7 billion, up 9.4% year over year. Of this, $7.29 billion was funded.
Operational Statistics
The total cost of revenues in the quarter increased 6.1% to $2,942 million. Operating income totaled $305 million compared with the year-ago quarter’s income of $258 million.
Adjusted operating income margin for the quarter was 10.8% compared with 10% in the prior-year quarter.
Interest expenses were $47 million compared with $44 million in the prior-year quarter.
Segmental Performance
Defense Solutions: Net revenues in this segment improved 3% year over year to $2,009 million in the third quarter. This upside can be primarily attributed to the start of the Navy Next Generation IT contract and revenue contributions from acquisitions.
The segment’s operating income declined to $140 million from the year-ago quarter’s $145 million, with the adjusted operating margin being 8.8%.
Health: The segment recorded revenues of $682 million in the third quarter, which soared 31% year over year. The revenue increase was primarily driven by the rise in medical examinations after the pandemic-led pause as well as increased volumes from the Defense Healthcare Management System Modernization (DHMSM) program. Also, the ramp-up of new programs such as the Military and Family Life Counseling (MFLC) program contributed to this unit’s revenue growth.
Operating income was $130 million compared with the year-ago quarter’s income of $75 million, while adjusted operating margin came in at 20.7%.
Civil: Revenues in this segment amounted to $792 million, up 3%. This uptick was primarily attributable to increased demand in existing programs with the Federal Aviation Administration (FAA) and National Science Foundation (NSF) as well as commercial energy providers.
While operating income improved from $54 million to $58 million, the adjusted operating margin was 9.6%.
Financials
Cash and cash equivalents as of Oct 1, 2021 were $587 million compared with $524 million as of Jan 1, 2021.
Long-term debt, net of current portion, amounted to $4,616 million as of Oct 1, 2021 compared with $4,644 million as of Jan 1, 2021.
Net cash provided by operating activities during the first nine months of 2021 was $821 million compared with $1,386 million a year ago.
2021 Guidance
Leidos Holdings raised its earnings view for 2021. The company currently expects to generate adjusted earnings in the range of $6.55-$6.75 per share, compared with the earlier projection of $6.35-$6.65. The Zacks Consensus Estimate for 2021 earnings, pegged at $6.48 per share, is lower than the company’s new view.
Leidos Holdings currently expects its revenues to be in the range of $13.7-$13.9 billion, narrower than its earlier projection of $13.7-$14.1 billion. The Zacks Consensus Estimate for 2021 revenues, pegged at $13.95 billion, is above the newly guided range.
The company’s cash flow from operating activities is still anticipated to be at or above $875 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Leidos has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Leidos has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Leidos (LDOS) Down 8% Since Last Earnings Report?
A month has gone by since the last earnings report for Leidos (LDOS - Free Report) . Shares have lost about 8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Leidos due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Leidos Holdings Beats on Q3 Earnings, Ups 2021 EPS View
Leidos Holdings third-quarter 2021 adjusted earnings of $1.80 per share exceeded the Zacks Consensus Estimate of $1.60 by 12.5%. The bottom line also improved 22.4% from $1.47 per share registered a year ago.
The company reported GAAP earnings of $1.43 per share, which improved from the year-ago quarter’s earnings of $1.13.
Total Revenues
Leidos Holdings generated total revenues of $3,483 million in the quarter under consideration, missing the Zacks Consensus Estimate of $3,582 million by 2.8%. The top line improved 7.4% year over year. This increase in revenues is primarily attributable to growth across all its reportable segments.
Backlog
At the end of the reported quarter, the company’s total backlog was $34.7 billion, up 9.4% year over year. Of this, $7.29 billion was funded.
Operational Statistics
The total cost of revenues in the quarter increased 6.1% to $2,942 million. Operating income totaled $305 million compared with the year-ago quarter’s income of $258 million.
Adjusted operating income margin for the quarter was 10.8% compared with 10% in the prior-year quarter.
Interest expenses were $47 million compared with $44 million in the prior-year quarter.
Segmental Performance
Defense Solutions: Net revenues in this segment improved 3% year over year to $2,009 million in the third quarter. This upside can be primarily attributed to the start of the Navy Next Generation IT contract and revenue contributions from acquisitions.
The segment’s operating income declined to $140 million from the year-ago quarter’s $145 million, with the adjusted operating margin being 8.8%.
Health: The segment recorded revenues of $682 million in the third quarter, which soared 31% year over year. The revenue increase was primarily driven by the rise in medical examinations after the pandemic-led pause as well as increased volumes from the Defense Healthcare Management System Modernization (DHMSM) program. Also, the ramp-up of new programs such as the Military and Family Life Counseling (MFLC) program contributed to this unit’s revenue growth.
Operating income was $130 million compared with the year-ago quarter’s income of $75 million, while adjusted operating margin came in at 20.7%.
Civil: Revenues in this segment amounted to $792 million, up 3%. This uptick was primarily attributable to increased demand in existing programs with the Federal Aviation Administration (FAA) and National Science Foundation (NSF) as well as commercial energy providers.
While operating income improved from $54 million to $58 million, the adjusted operating margin was 9.6%.
Financials
Cash and cash equivalents as of Oct 1, 2021 were $587 million compared with $524 million as of Jan 1, 2021.
Long-term debt, net of current portion, amounted to $4,616 million as of Oct 1, 2021 compared with $4,644 million as of Jan 1, 2021.
Net cash provided by operating activities during the first nine months of 2021 was $821 million compared with $1,386 million a year ago.
2021 Guidance
Leidos Holdings raised its earnings view for 2021. The company currently expects to generate adjusted earnings in the range of $6.55-$6.75 per share, compared with the earlier projection of $6.35-$6.65. The Zacks Consensus Estimate for 2021 earnings, pegged at $6.48 per share, is lower than the company’s new view.
Leidos Holdings currently expects its revenues to be in the range of $13.7-$13.9 billion, narrower than its earlier projection of $13.7-$14.1 billion. The Zacks Consensus Estimate for 2021 revenues, pegged at $13.95 billion, is above the newly guided range.
The company’s cash flow from operating activities is still anticipated to be at or above $875 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Leidos has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Leidos has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.