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Leidos Holdings (LDOS) Q4 Earnings Beat Estimates, Revenues Miss

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Leidos Holdings, Inc.’s (LDOS - Free Report) fourth-quarter 2020 adjusted earnings of $1.63 per share surpassed the Zacks Consensus Estimate of $1.60 by 1.9%. The bottom line also increased 7.9% from $1.51 a year ago.

Moreover, the company’s GAAP earnings of $1.37 per share increased from $1.26 in the year-ago quarter. This upside can be attributed to solid revenues and operating income.

For 2020, the company reported adjusted earnings of $5.83 per share that surpassed the Zacks Consensus Estimate of $5.81 by 0.3%. The bottom line increased 12.8% from $5.17 a year ago.

Total Revenues

Leidos Holdings generated total revenues of $3,252 million in the quarter, which missed the Zacks Consensus Estimate of $3,400 million by 4.4%. The top line, however, improved 10.1% year over year, backed by growth across its Defense Solutions and Civil segment.

For 2020, the company generated total revenues of $12.3 billion, which missed the Zacks Consensus Estimate of $12.44 billion by 1.1%. The full-year top line also improved 10.8% from the prior year.

Backlog

At the end of 2020, the company’s total backlog was $31.9 billion compared with $24.1 billion as of Dec 28, 2019. Of this, $6.6 billion was funded.

Operational Statistics

Total cost of revenues in the fourth quarter increased 9.3% to $2,761 million.

Operating income totaled $299 million compared with $261 million in the year-ago period.

Operating income margin increased to 9.2% from 8.8% in the prior-year quarter.

Interest expenses were $46 million, higher than the prior-year quarter’s $34 million.

Segmental Performance

Defense Solutions: Net revenues in this segment increased 16.5% to $1,928 million from $1,655 million in the prior-year quarter. The revenue growth was primarily attributable to $937 million of revenues related to the acquisition of Dynetics, program wins and a net increase in materials volume on certain programs.

Also, the segment’s operating income came in line with the prior year’s figure of $147 million. Operating margin contracted 130 basis points (bps) to 7.6%.

Health: The segment recorded revenues of $513 million in the fourth quarter, down 2.5% year over year. The revenue decline was primarily attributable to the timing of program execution due to COVID-19 and the impact from the sale of its health staff augmentation business.

Operating income increased 17.8% to $86 million, while operating margin expanded 290 bps to 16.8%.

Civil: Revenues in this segment amounted to $811 million, up 4.9% year over year. The revenue growth was primarily attributable to $243 million of revenues related to the acquisition of the SD&A businesses and program wins.

While operating income improved 20.3% to $89 million, operating margin expanded 140 bps to 11%.

Financials

Cash and cash equivalents as of Jan 1, 2021, were $524 million compared with $668 million as of Jan 3, 2020.

Net cash provided by operating activities at the end of 2020 amounted to $1,334 million compared with $992 million a year ago.

Leidos Holdings, Inc. Price, Consensus and EPS Surprise

Guidance

Leidos Holdings issued its guidance for 2021. The company currently expects adjusted earnings of $6.15-$6.45 per share. The Zacks Consensus Estimate for 2021 earnings is pegged at $6.40 per share, higher than the midpoint of the company’s projected range.

Moreover, the company expects 2021 revenues of $13.7-$14.1 billion. The Zacks Consensus Estimate for revenues stands at $13.93 billion, higher than the midpoint of the company’s guided range.

Management expects adjusted EBITDA margin of 10.3-10.5%, while cash flow from operating activities is expected to be at or above $850 million.

Zacks Rank

Leidos Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Lockheed Martin Corp. (LMT - Free Report) reported fourth-quarter 2020 earnings from continuing operations of $6.38 per share, which came in line with the Zacks Consensus Estimate.

Hexcel Corporation (HXL - Free Report) reported fourth-quarter 2020 loss of 18 cents per share, in line with the Zacks Consensus Estimate.

General Dynamics Corporation (GD - Free Report) reported fourth-quarter 2020 earnings from continuing operations of $3.49 per share, which missed the Zacks Consensus Estimate of $3.55 by 1.7%.

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