Leidos Holdings, Inc.’s (LDOS - Free Report) second-quarter 2020 adjusted earnings of $1.55 per share beat the Zacks Consensus Estimate of $1.07 by 44.9%. Moreover, the bottom line grew 33.6% from $1.16 per share registered in the year-ago period.
Further, the company’s GAAP earnings of $1.06 per share improved from the year-ago quarter’s 93 cents.
Leidos Holdings generated total revenues of $2,914 million in the quarter under consideration, which missed the Zacks Consensus Estimate of $3,042 million by 4.2%. The top line however improved 6.8% year over year, backed by growth across all segments, except Health.
At the end of the reported quarter, the company’s total backlog was $30.7 billion compared with $28.3 billion at first-quarter 2020 end. Of this total backlog, $7 billion was funded.
Total cost of revenues in the quarter increased 7.8% to $2,531 million. Operating income totaled $249 million, up 18.6% from the year-ago quarter’s figure.
Adjusted operating income margin for the quarter was 11.2% compared with 9.4% in the prior-year quarter, primarily attributable to a net gain recognized upon the receipt of proceeds related to the VirnetX legal matter and program wins.
Interest expenses were $41 million compared with $33 million in the prior-year quarter.
Defense Solutions: Net revenues at this segment improved 12.6% to $1,757 million from the prior-year quarter’s $1,560 million. This upside can be primarily attributed to revenues related to the acquisition of Dynetics, program wins and a net increase in program volumes.
Moreover, the segment’s operating income improved to $119 million from the year-ago quarter’s $113 million while the operating margin contracted 40 basis points (bps) to 6.8%.
Health: The segment recorded revenues of $399 million in the second quarter, down 20.4% year over year. The improvement was primarily driven by a net increase in program volumes, program wins and the impact of the acquisition of IMX Medical Management Services, Inc.
Operating income slumped 98.4% to $1 million, while operating margin contracted 1190 bps to 0.3%.
Civil: Revenues at this segment amounted to $758 million, up 13.6%. This uptick was primarily attributable to program wins and a net increase in program volumes.
While operating income rose 39.3% to $78 million, operating margin expanded 190 bps to 10.3%.
Cash and cash equivalents, as of Jul 3, 2020, was $588 million compared with $668 million, as of Jan 3, 2020.
Long-term debt, net of current portion, amounted to $4,148 million, as of Apr 3, 2020, compared with $2,925 million, as of Jan 3, 2020.
Net cash provided by operating activities in the second quarter of 2020 was $794 million compared with $474 million a year ago.
Leidos Holdings revised its outlook for 2020. The company currently expects adjusted earnings in the $5.25-$5.55 range, up from $5.00-$5.30 per share anticipated earlier. The Zacks Consensus Estimate for 2020 earnings, pegged at $5.24 per share, is below the company’s projection.
Leidos Holdings currently expects revenues in the range of $12.2-$12.6 billion this year, down from $12.5-$12.9 billion anticipated earlier. The Zacks Consensus Estimate for 2020 revenues, pegged at $12.67 billion, is above the company-guided range.
The company’s cash flow from operating activities is now anticipated to be at or above $1.2 billion compared with $1 billion projected earlier.
Leidos Holdings currently carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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