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Leidos Holdings (LDOS) Q4 Earnings Top, Revenues Lag Estimates

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Leidos Holdings, Inc.’s (LDOS - Free Report) fourth-quarter 2018 adjusted earnings of $1.10 per share surpassed the Zacks Consensus Estimate of $1.07 by 2.8%. The bottom line also increased 26.4% from 87 cents per share registered a year ago.

Moreover, the company’s GAAP earnings of $1.25 per share surged 79% from the year-ago figure of 70 cents.

The year-over-year bottom-line improvement can be attributed to solid operating income growth.

For 2018, the company’s adjusted earnings came in at $4.38 per share, which exceeded the Zacks Consensus Estimate of $4.36 by 0.5%. The reported figure also improved 17.7% from the year-ago tally.

Leidos Holdings, Inc. Price, Consensus and EPS Surprise

Leidos Holdings, Inc. Price, Consensus and EPS Surprise | Leidos Holdings, Inc. Quote

Total Revenues

Leidos Holdings generated total revenues of $2,647 million in the quarter under consideration, which missed the Zacks Consensus Estimate of $2,666 million by 0.7%. However, the top line improved 5.2% year over year. For 2018, the company’s total revenues amounted to $10.19 billion, which missed the Zacks Consensus Estimate of $10.21 billion by a whisker.

Nevertheless, the reported figure inched up 0.2% year over year.

Backlog

At the end of 2018, the company’s backlog of signed business orders was $20.8 billion, of which $6.4 billion was funded.

Operational Statistics

In the reported quarter, total cost of revenues increased by 4.5% to $2,278 million. Operating income was $188 million compared with $101million in the year-ago period, primarily owing to decline in acquisitions, integration and restructuring costs, and lower amortization of intangible assets.

As a result, the operating margin expanded to 7.1% from 4% in the prior-year quarter.

Interest expenses summed $34 million compared with $35 million in the year-ago quarter.

Segmental Performance

Defense Solutions: Net revenues at this segment improved 3.6% to $1,265 million from the prior-year figure of $1,221 million. This upside can be primarily attributed to new awards that this segment received in the quarter under review.

However, the segment’s operating income declined to $81 million from the year-ago income of $85 million with the operating margin having contracted60 basis points (bps) to 6.4%.

Health: The segment recorded revenues of $497 million in the fourth quarter, up 12.7% year over year. The improvement was primarily driven by a net increase in program volumes.

While operating income improved 54.5% to $68 million, operating margin expanded 370 bps to 13.7%.

Civil: Revenues at this segment amounted to $885 million, up 3.6%. This uptick was mainly driven by expanded volumes from new programs.

Operating income also rose 10.7% to $93 million, while operating margin expanded 40 bps to 7%.

Financials

Cash and cash equivalents as of Dec 31, 2018, were $327 million compared with $390 million as of Dec 29, 2017. Net cash provided by operating activities in 2018 was $768 million compared with $526 million a year ago.

2019 Guidance

Leidos Holdings issued an outlook for 2019. The company currently expects its adjusted earnings to be in the range of $4.25-$4.60 per share on revenues of $10.5-$10.9 billion.

The Zacks Consensus Estimates for the company’s 2019 earnings and revenues are pegged at $4.71 and $10.63 billion, respectively. While the bottom line estimate surpasses the company provided guidance, the top line estimate lies near the mid-point of the company's provided outlook.

Moreover, the company projects its cash flow from operating activities to be $725 million, at 2019 end.

Zacks Rank

Leidos Holdings has a Zacks Rank #4 (Sell).

Recent Defense Releases

FLIR Systems Inc.’s (FLIR - Free Report) fourth-quarter 2018 adjusted earnings of 62 cents per share surpassed the Zacks Consensus Estimate of 60 cents by 3.3%. The company carries a Zacks Rank #3 (Hold).

Textron (TXT - Free Report) reported fourth-quarter 2018 adjusted earnings of $1.15 per share from continuing operations, which exceeded the Zacks Consensus Estimate of 98 cents by 17.3%. The company has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hexcel Corporation’s (HXL - Free Report) fourth-quarter 2018 adjusted earnings of 82 cents per share outpaced the Zacks Consensus Estimate of 80 cents by 2.5%. The company carries a Zacks Rank #2 (Buy).

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