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What's in Store for Leidos Holdings (LDOS) in Q4 Earnings?

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Leidos Holdings, Inc. LDOS is scheduled to release fourth-quarter and 2019 results on Feb 18, after market close. In the last reported quarter, the company delivered a positive earnings surprise of 13.33%.

Moreover, Leidos Holdings has a four-quarter positive earnings surprise of 8.93% on average.

Let’s discuss the factors that are likely to get reflected in the upcoming quarterly results.

Factors to Consider

Leidos Holdings generates almost half of its revenues from the Defense Solutions segment. The current U.S. administration is in favor of spending abundantly on the nation’s defense. As a result, steady order growth from Pentagon and other U.S. allies are expected to have boosted defense revenues for the company.  

In Health segment, Leidos Holdings completed the acquisition of IMX Medical Management Services and its affiliated businesses in the third quarter. Positive synergies from this buyout are expected to have bolstered the company’s fourth-quarter performance.

Leidos Holdings, Inc. Price and EPS Surprise

Leidos Holdings, Inc. Price and EPS Surprise

Leidos Holdings, Inc. price-eps-surprise | Leidos Holdings, Inc. Quote

Moreover, during the fourth quarter, Leidos Holdings completed the Department of Defense (DoD) Healthcare Management Systems Modernization program (DHMSM), the largest IT transformation in the history of the military health system. Further, the company started deployment of MHS Genesis, a new electronic health record for the Military Health System since Sep 7, 2019.

Such developments must have boosted new program revenues for the company in the yet-to-be-reported quarter. Considering the aforementioned factors, we remain optimistic about Leidos Holdings’ top and bottom line performances in the fourth quarter.

Notably, the Zacks Consensus Estimate for fourth-quarter revenues is pegged at $2.83 billion, which indicates a rise of 6.9% from the year-ago quarter’s reported figure.

Such solid revenue growth along with expected segmental operating margin growth might have boosted the bottom line. The Zacks Consensus Estimate for fourth-quarter earnings per share is pegged at $1.35, which indicates rise of 22.7% from the year-ago quarter’s reported figure.

During the fourth quarter, Leidos Holdings signed a few strategic agreements with the likes of Clarify Health Solutions, D.C. United and Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network. We may expect further details on these deals and their respective impact, if any, once the company releases its numbers on Feb 18.  

Earning Whispers

Our proven model does not conclusively predict an earnings beat for Leidos Holdings this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: The company’s Earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Leidos Holdings carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Recent Defense Releases

Raytheon Company RTN reported fourth-quarter 2019 earnings per share (EPS) of $3.16 from continuing operations, outpacing the Zacks Consensus Estimate of $3.11 by 1.6%. The bottom-line figure also improved 7.8% from the year-ago quarter’s $2.93 owing to operational improvements.

Lockheed Martin Corp. (LMT - Free Report) reported fourth-quarter 2019 earnings of $5.29 per share, which surpassed the Zacks Consensus Estimate of $4.99 by 6%. The bottom line also improved 20.5% from $4.39 in the year-ago quarter.

Textron Inc. TXT reported fourth-quarter 2019 adjusted earnings of $1.11 per share, which surpassed the Zacks Consensus Estimate of $1.08 by 2.8%. The bottom line, however, declined 3.5% from $1.15 in the year-ago quarter.

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