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Leidos (LDOS) Wins $631M Deal to Aid US Army's DIABLO Program

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Leidos Holdings, Inc. (LDOS - Free Report) recently clinched a $631 million contract from the U.S. Army to support the Development, Integration, Acquisitions, Bridging to Logistics & Operations (“DIABLO”) program. This contract win should strengthen LDOS’ footprint in the military sensor market.

About the Deal

The aforementioned contract, overseen by the Project Director Sensors-Aerial Intelligence (“PD SAI”), calls for the development, acquisition, fielding and lifecycle support of tactically relevant aerial intelligence, surveillance and reconnaissance (AISR) sensors and integrated systems across a wide range of intelligence capabilities. This will enable PD SAI to be agile and adaptable while advancing the Army's modernization objectives, thereby enhancing support for the U.S. Army's future capabilities.

Leidos’ Take on Military Sensors

Leidos Holdings develops effective advanced sensor algorithms for military sensor systems. Its product portfolio includes a wide variety of military sensors like electro-optics/infrared (EO/IR) sensors, electromagnetic radiation sensors, magnetic sensors and a few more. The company’s complicated sensor algorithms are vital for numerous missions, including ballistic missile defense, air defense, air-to-ground systems, border security, and intelligence, surveillance and reconnaissance.

One such of its products is the Assured Data Engine for Positioning and Timing sensor solution for the Defense Advanced Research Projects Agency, which allows warfighters to maintain positioning and timing awareness when a GPS signal is compromised either in a remote environment like a rocky canyon or when adversaries intentionally distort signals through jamming or spoofing.

Such significant products in its portfolio enable Leidos to witness a stream of order flow, like the latest one, which boosts its backlog and future revenue generation prospects.

Growth Prospects

The paradigm of the defense structure needs to be continuously upgraded with innovative technologies due to the ever-changing defense needs of nations worldwide. Hence, integrated and up-to-date sensors play a critical role in effectively defending a nation’s border and are thus expected to witness increased demand in the coming days.

Per a report from Mordor Intelligence, the military sensor market is projected to witness a CAGR of 6.2% over the 2024-2029 period. This should bode well for Leidos, which offers a wide range of technologically developed sensor systems for military applications.

Other defense majors who have carved out a position in the military sensor market and should benefit from this market’s growth prospects are as follows:

Lockheed Martin (LMT - Free Report) :  The company is one of the leading manufacturers of military sensors. Its infrared sensor systems provide advanced precision targeting, navigation, threat detection and next-generation intelligence, surveillance and reconnaissance capabilities. Some of LMT’s renowned sensors are LONGBOW Sensors, IRST21 sensor system, Legion Pod, etc.

The stock boasts a long-term earnings growth rate of 4.2%. The Zacks Consensus Estimate for LMT’s 2024 sales indicates an improvement of 2.9% from the previous year’s reported sales.

Northrop Grumman (NOC - Free Report) : The company is an industry leader at the forefront of the design, development and deployment of some of the world’s most cutting-edge sensors and systems. Its product range includes JADC2, EO/IR sensors, G/ATOR, etc.

The stock boasts a long-term earnings growth rate of 9.9%. The Zacks Consensus Estimate for NOC’s 2024 sales implies an improvement of 4.6% from the previous year’s reported level.

General Dynamics (GD - Free Report) : The company designs and develops high-performance sensors to gather data across the sea, land, air, space and cyber domains. Its TACLANE Trusted Sensor software can be used in several network topologies as an in-line HAIPE sensor or a separate secured network sensor. Therefore, it can act as an Intrusion Detection System or Intrusion Prevention System.

The stock boasts a long-term earnings growth rate of 11%. The Zacks Consensus Estimate for GD’s 2024 sales calls for an increase of 10.5% from the previous year’s reported figure.

Price Movement

In the past three months, shares of Leidos have risen 20.2% against the industry’s decline of 2.8%.

Zacks Investment Research
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Zacks Rank

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


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