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Leidos Holdings (LDOS) Q1 Earnings Miss, Revenues Rise Y/Y

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Leidos Holdings, Inc.’s (LDOS - Free Report) first-quarter 2020 adjusted earnings of $1.19 per share missed the Zacks Consensus Estimate of $1.24 by 4%. However, the bottom line grew 5.3% from $1.13 per share registered a year ago.

Moreover, the company’s GAAP earnings of 80 cents per share declined from the year-ago quarter’s $1.29.

Total Revenues

Leidos Holdings generated total revenues of $2,889 million in the quarter under consideration, which exceeded the Zacks Consensus Estimate of $2,884 million by 0.2%. The top line also improved 12.1% year over year, backed by growth across all segments.

Backlog

At the end of the reported quarter, the company’s total backlog was $28.3 billion compared with $24.1 billion at 2019-end. Of this total backlog, $6.2 billion was funded.

Operational Statistics

Total cost of revenues in the quarter increased 12.3% to $2,494 million. Operating income totaled $192 million, in line with the year-ago quarter’s figure.

Non-GAAP operating income margin for the quarter was 8.5% compared with 9.3% in the prior-year quarter, primarily attributable to higher indirect expenditures, including the impacts of the coronavirus pandemic.

Interest expenses summed $48 million compared with $38 million in the prior-year quarter.

Segmental Performance

Defense Solutions: Net revenues at this segment improved 14.4% to $1,705 million from the prior-year quarter’s $1,491 million. This upside can be primarily attributed to revenues related to the acquisition of Dynetics, program wins and a net increase in program volumes.

However, the segment’s operating income declined to $95 million from the year-ago quarter’s $104 million, with the operating margin contracting 140 basis points (bps) to 5.6%.

Health: The segment recorded revenues of $530 million in the first quarter, up 14.5% year over year. The improvement was primarily driven by a net increase in program volumes, program wins and the impact of the acquisition of IMX Medical Management Services, Inc. during the third quarter of fiscal 2019.

Operating income surged 62.2% to $73 million, while operating margin expanded 410 bps to 13.8%.

Civil: Revenues at this segment amounted to $654 million, up 5%. This uptick was primarily attributable to program wins and a net increase in program volumes.

While operating income rose 1.7% to $59 million, operating margin contracted 30 bps to 9%.

Leidos Holdings, Inc. Price, Consensus and EPS Surprise

Financials

Cash and cash equivalents, as of Apr 3, 2020, were $445 million compared with $668 million, as of Jan 3, 2020.

Long-term debt, net of current portion, amounted to $2,444 million, as of Apr 3, 2020, compared with $2,925 million, as of Jan 3, 2020.

Net cash provided by operating activities in the first quarter of 2020 was $372 million compared with $288 million a year ago.

2020 Guidance

Leidos Holdings revised its outlook for 2020. The company currently expects adjusted earnings in the $5.00-$5.30 range, down from $5.30-$5.65 per share anticipated earlier. The Zacks Consensus Estimates for 2020 earnings, pegged at $5.49 per share, is below the company’s projected view.

Leidos Holdings currently expects revenues in the range of $12.5-$12.9 billion this year, down from $12.6-$13.0 billion anticipated earlier. The Zacks Consensus Estimates for 2020 revenues, pegged at $12.69 billion, is below the midpoint of the company-guided range.

The company’s cash flow from operating activities is anticipated to be at or above $1 billion.

Zacks Rank

Leidos Holdings carries a Zacks Rank #3 (Hold). 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) , a Zacks Rank #3 company, reported first-quarter 2020 earnings of $6.08 per share, which surpassed the Zacks Consensus Estimate of $5.76 by 5.5%. The bottom line also improved 1.5% from the year-ago quarter’s $5.99.

General Dynamics Corporation (GD - Free Report) , a Zacks Rank #3 company, reported first-quarter 2020 earnings from continuing operations of $2.43 per share, which missed the Zacks Consensus Estimate of $2.46 by 1.2%.
Moreover, earnings declined 5.1% from $2.56 in the year-ago quarter.

Teledyne Technologies Inc. (TDY - Free Report) , a Zacks Rank #3 company, reported first-quarter 2020 earnings of $2.28 per share, which surpassed the Zacks Consensus Estimate of $2.10 by 8.6%. The bottom line also improved 12.9% from the year-ago quarter’s $2.02.

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