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Why Is Leidos (LDOS) Up 5.4% 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 added about 5.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Leidos due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Leidos Holdings’ fourth-quarter 2023 adjusted earnings of $1.99 per share beat the Zacks Consensus Estimate of $1.73 by 15%. The bottom line also increased 8.7% from $1.83 registered in the prior-year quarter.
The year-over-year upside was driven by an improved program execution and reduced indirect spending across the company as well as increased volumes and higher incentive awards in the medical examination business.
The company reported GAAP earnings of $1.66 per share, up from the prior-year quarter’s level of $1.28.
For 2023, the company reported adjusted earnings of $7.30 per share, which beat the Zacks Consensus Estimate of $7.03 by 3.8%. The bottom line also increased from $6.60 registered a year ago.
Total Revenues
Leidos Holdings generated total revenues of $3.98 billion, which beat the Zacks Consensus Estimate of $3.79 million by 5%.
The top line also improved 7.7% year over year, driven by increased demand across all customer segments, especially Health.
For 2023, the company reported revenues of $15.44 billion, which beat the Zacks Consensus Estimate of $15.25 billion by 1.2%. The full-year revenues also increased 7.2% from $14.40 billion registered a year ago.
Backlog
The company recorded a total backlog of $39.96 billion, up from $38.04 billion recorded in the prior-year quarter. Of this amount, $8.80 billion was funded.
Operational Statistics
The cost of revenues increased 6.6% year over year to $3,385 million. The company reported an operating income of $361 million compared with $265 million in the year-ago quarter.
The operating margin was 9.1% compared with 7.2% in the prior-year period. Interest expenses totaled $49 million, down 3.9% year over year.
Segmental Performance
Defense Solutions: Net revenues in this segment improved 7% year over year to $2.21 billion. The increase can be attributed to higher revenue growth from digital modernization, including the Navy Next-Generation Enterprise Network Recompete Service Management, Integration and Transport contract, as well as offensive hypersonics programs. The acquisition of Cobham Special Missions and increased task order volume from the Sentinel program also benefited this unit’s revenues.
The operating income increased to $167 million from the year-ago quarter’s level of $132 million. The segment’s adjusted operating margin was 9%.
Health: The segment recorded revenues of $807 million, up 17% year over year. This improvement can be attributed to higher levels of medical examinations and growth from the Social Security Administration Information Technology Support Services Contract II.
The operating income totaled $147 million compared with $86 million in the year-ago quarter. The segment’s adjusted operating margin was 19%.
Civil: Revenues in this segment amounted to $961 million, up 2% year over year. The upside was due to higher infrastructure spending by the Federal Aviation Administration.
This segment recorded an operating income of $90 million compared with $74 million in the year-ago period. The segment’s adjusted operating margin was 10.8%.
Financials
Leidos Holdings’ cash and cash equivalents as of Dec 29, 2023, were $777 million compared with $516 million as of Dec 30, 2022.
The long-term debt, net of the current portion, amounted to $4,664 million as of Dec 29, 2023, compared with $3,928 million as of Dec 30, 2022.
Net cash flow from operating activities totaled $1,165 million at the end of 2023 compared with $992 million recorded a year ago.
2024 Guidance
Leidos Holdings has provided its 2024 guidance. The company expects to generate adjusted earnings in the range of $7.50-$7.90 per share. The Zacks Consensus Estimate for earnings is pegged at $7.48 per share, lower than the projected range.
LDOS projects 2024 revenues in the range of $15.7-$16.1 billion. The Zacks Consensus Estimate for revenues is pegged at $15.90 billion, in line with the midpoint of the guided range.
The company currently expects cash flow from operating activities to be approximately $1.1 billion during 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Leidos has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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 #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Leidos belongs to the Zacks Aerospace - Defense industry. Another stock from the same industry, Huntington Ingalls (HII - Free Report) , has gained 3.4% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Huntington Ingalls reported revenues of $3.18 billion in the last reported quarter, representing a year-over-year change of +13%. EPS of $6.90 for the same period compares with $3.07 a year ago.
Huntington Ingalls is expected to post earnings of $3.48 per share for the current quarter, representing a year-over-year change of +7.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.3%.
Huntington Ingalls has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Why Is Leidos (LDOS) Up 5.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Leidos (LDOS - Free Report) . Shares have added about 5.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Leidos due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Leidos Holdings Q4 Earnings Top, Revenues Rise Y/Y
Leidos Holdings’ fourth-quarter 2023 adjusted earnings of $1.99 per share beat the Zacks Consensus Estimate of $1.73 by 15%. The bottom line also increased 8.7% from $1.83 registered in the prior-year quarter.
The year-over-year upside was driven by an improved program execution and reduced indirect spending across the company as well as increased volumes and higher incentive awards in the medical examination business.
The company reported GAAP earnings of $1.66 per share, up from the prior-year quarter’s level of $1.28.
For 2023, the company reported adjusted earnings of $7.30 per share, which beat the Zacks Consensus Estimate of $7.03 by 3.8%. The bottom line also increased from $6.60 registered a year ago.
Total Revenues
Leidos Holdings generated total revenues of $3.98 billion, which beat the Zacks Consensus Estimate of $3.79 million by 5%.
The top line also improved 7.7% year over year, driven by increased demand across all customer segments, especially Health.
For 2023, the company reported revenues of $15.44 billion, which beat the Zacks Consensus Estimate of $15.25 billion by 1.2%. The full-year revenues also increased 7.2% from $14.40 billion registered a year ago.
Backlog
The company recorded a total backlog of $39.96 billion, up from $38.04 billion recorded in the prior-year quarter. Of this amount, $8.80 billion was funded.
Operational Statistics
The cost of revenues increased 6.6% year over year to $3,385 million. The company reported an operating income of $361 million compared with $265 million in the year-ago quarter.
The operating margin was 9.1% compared with 7.2% in the prior-year period.
Interest expenses totaled $49 million, down 3.9% year over year.
Segmental Performance
Defense Solutions: Net revenues in this segment improved 7% year over year to $2.21 billion. The increase can be attributed to higher revenue growth from digital modernization, including the Navy Next-Generation Enterprise Network Recompete Service Management, Integration and Transport contract, as well as offensive hypersonics programs. The acquisition of Cobham Special Missions and increased task order volume from the Sentinel program also benefited this unit’s revenues.
The operating income increased to $167 million from the year-ago quarter’s level of $132 million. The segment’s adjusted operating margin was 9%.
Health: The segment recorded revenues of $807 million, up 17% year over year. This improvement can be attributed to higher levels of medical examinations and growth from the Social Security Administration Information Technology Support Services Contract II.
The operating income totaled $147 million compared with $86 million in the year-ago quarter. The segment’s adjusted operating margin was 19%.
Civil: Revenues in this segment amounted to $961 million, up 2% year over year. The upside was due to higher infrastructure spending by the Federal Aviation Administration.
This segment recorded an operating income of $90 million compared with $74 million in the year-ago period. The segment’s adjusted operating margin was 10.8%.
Financials
Leidos Holdings’ cash and cash equivalents as of Dec 29, 2023, were $777 million compared with $516 million as of Dec 30, 2022.
The long-term debt, net of the current portion, amounted to $4,664 million as of Dec 29, 2023, compared with $3,928 million as of Dec 30, 2022.
Net cash flow from operating activities totaled $1,165 million at the end of 2023 compared with $992 million recorded a year ago.
2024 Guidance
Leidos Holdings has provided its 2024 guidance. The company expects to generate adjusted earnings in the range of $7.50-$7.90 per share. The Zacks Consensus Estimate for earnings is pegged at $7.48 per share, lower than the projected range.
LDOS projects 2024 revenues in the range of $15.7-$16.1 billion. The Zacks Consensus Estimate for revenues is pegged at $15.90 billion, in line with the midpoint of the guided range.
The company currently expects cash flow from operating activities to be approximately $1.1 billion during 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Leidos has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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 #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Leidos belongs to the Zacks Aerospace - Defense industry. Another stock from the same industry, Huntington Ingalls (HII - Free Report) , has gained 3.4% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Huntington Ingalls reported revenues of $3.18 billion in the last reported quarter, representing a year-over-year change of +13%. EPS of $6.90 for the same period compares with $3.07 a year ago.
Huntington Ingalls is expected to post earnings of $3.48 per share for the current quarter, representing a year-over-year change of +7.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.3%.
Huntington Ingalls has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.