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Leidos (LDOS) Up 2.5% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Leidos (LDOS - Free Report) . Shares have added about 2.5% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Leidos Holdings Beats on Q1 Earnings, Ups '24 EPS View
Leidos Holdings' first-quarter 2024 adjusted earnings of $2.29 per share beat the Zacks Consensus Estimate of $1.65 by 38.8%. The bottom line also increased 55.8% from $1.47 registered in the prior-year quarter.
The year-over-year upside was driven by increased volumes of fixed-rate managed health services and improved cost control across the company.
LDOS reported GAAP earnings of $2.07 per share, up from the prior-year quarter’s level of $1.17.
Total Revenues
Leidos Holdings generated total revenues of $3.98 billion, which beat the Zacks Consensus Estimate of $3.80 million by 4.7%.
The top line also improved 7.5% year over year, driven by increased demand across all customer segments, especially for managed health services.
Backlog
The company recorded a total backlog of $36.57 billion, down from $39.96 billion recorded in the fourth quarter of 2023. Of this amount, $7.97 billion was funded.
Operational Statistics
The cost of revenues increased 4.2% year over year to $3,337 million. The company reported an operating income of $415 million compared with $265 million in the year-ago quarter.
The operating margin was 10.4% compared with 7.2% in the prior-year period. Interest expenses totaled $49 million, down 9.3% year over year.
Segmental Performance
National Security and Digital: Net revenues in this segment improved 2% year over year to $1.79 billion. The increase can be attributed to increased volumes from the Sentinel contract and Defense Enclave Services (DES) program.
This segment’s adjusted operating income increased to $181 million from the year-ago quarter’s level of $157 million. The segment’s adjusted operating margin was 10.1%, up 120 basis points (bps) from the prior-year quarter’s figure of 8.9%.
Health & Civil: The segment recorded revenues of $1.20 billion, up 19% year over year. This improvement can be attributed to increased volumes and case complexity within the managed health services business.
This unit’s adjusted operating income totaled $228 million compared with $123 million in the year-ago quarter. The segment’s adjusted operating margin was 19%, up 680 bps year over year.
Commercial & International: Revenues in this segment amounted to $509 million, up 4% year over year. The upside was driven by increased deliveries of security products.
This segment recorded an adjusted operating income of $42 million compared with $23 million in the year-ago period. The adjusted operating margin was 8.3%, up 360 bps year over year.
Defense Systems: Revenues in this segment amounted to $474 million, up 7% year over year. The upside was driven by increased volumes within the airborne surveillance and reconnaissance and hypersonics businesses.
This segment recorded an adjusted operating income of $38 million compared with $43 million in the year-ago period. The adjusted operating margin was 8%, down 30 bps year over year.
Financials
Leidos Holdings’ cash and cash equivalents as of Mar 29, 2024, totaled $633 million compared with $777 million as of Dec 29, 2023.
The long-term debt, net of the current portion, amounted to $4.64 billion as of Mar 29, 2024, compared with $4.66 billion as of Dec 29, 2023.
Net cash flow from operating activities totaled $63 million at the end of the first quarter of 2024 against cash outflow from operating activities worth $98 million recorded a year ago.
2024 Guidance
Leidos Holdings has raised its 2024 guidance. The company now expects to generate adjusted earnings in the range of $8.40-$8.80 per share, up from the prior guidance of $7.50-$7.90. The Zacks Consensus Estimate for LDOS’ 2024 earnings is pegged at $7.77 per share, lower than the company’s projected range.
LDOS currently expects 2024 revenues in the band of $16.0-$16.4 billion, up from the earlier guided range of $15.7-$16.1 billion. The Zacks Consensus Estimate for revenues is pegged at $15.97 billion, lower than the company’s guided range.
LDOS currently expects 2024 cash flow from operating activities to be $1.3 billion, up from the prior projection of $1.1 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 11.06% due to these changes.
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 a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Leidos has a Zacks Rank #1 (Strong 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, RTX (RTX - Free Report) , has gained 3.3% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
RTX reported revenues of $19.31 billion in the last reported quarter, representing a year-over-year change of +12.2%. EPS of $1.34 for the same period compares with $1.22 a year ago.
For the current quarter, RTX is expected to post earnings of $1.28 per share, indicating a change of -0.8% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
RTX has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Leidos (LDOS) Up 2.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Leidos (LDOS - Free Report) . Shares have added about 2.5% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Leidos Holdings Beats on Q1 Earnings, Ups '24 EPS View
Leidos Holdings' first-quarter 2024 adjusted earnings of $2.29 per share beat the Zacks Consensus Estimate of $1.65 by 38.8%. The bottom line also increased 55.8% from $1.47 registered in the prior-year quarter.
The year-over-year upside was driven by increased volumes of fixed-rate managed health services and improved cost control across the company.
LDOS reported GAAP earnings of $2.07 per share, up from the prior-year quarter’s level of $1.17.
Total Revenues
Leidos Holdings generated total revenues of $3.98 billion, which beat the Zacks Consensus Estimate of $3.80 million by 4.7%.
The top line also improved 7.5% year over year, driven by increased demand across all customer segments, especially for managed health services.
Backlog
The company recorded a total backlog of $36.57 billion, down from $39.96 billion recorded in the fourth quarter of 2023. Of this amount, $7.97 billion was funded.
Operational Statistics
The cost of revenues increased 4.2% year over year to $3,337 million. The company reported an operating income of $415 million compared with $265 million in the year-ago quarter.
The operating margin was 10.4% compared with 7.2% in the prior-year period.
Interest expenses totaled $49 million, down 9.3% year over year.
Segmental Performance
National Security and Digital: Net revenues in this segment improved 2% year over year to $1.79 billion. The increase can be attributed to increased volumes from the Sentinel contract and Defense Enclave Services (DES) program.
This segment’s adjusted operating income increased to $181 million from the year-ago quarter’s level of $157 million. The segment’s adjusted operating margin was 10.1%, up 120 basis points (bps) from the prior-year quarter’s figure of 8.9%.
Health & Civil: The segment recorded revenues of $1.20 billion, up 19% year over year. This improvement can be attributed to increased volumes and case complexity within the managed health services business.
This unit’s adjusted operating income totaled $228 million compared with $123 million in the year-ago quarter. The segment’s adjusted operating margin was 19%, up 680 bps year over year.
Commercial & International: Revenues in this segment amounted to $509 million, up 4% year over year. The upside was driven by increased deliveries of security products.
This segment recorded an adjusted operating income of $42 million compared with $23 million in the year-ago period. The adjusted operating margin was 8.3%, up 360 bps year over year.
Defense Systems: Revenues in this segment amounted to $474 million, up 7% year over year. The upside was driven by increased volumes within the airborne surveillance and reconnaissance and hypersonics businesses.
This segment recorded an adjusted operating income of $38 million compared with $43 million in the year-ago period. The adjusted operating margin was 8%, down 30 bps year over year.
Financials
Leidos Holdings’ cash and cash equivalents as of Mar 29, 2024, totaled $633 million compared with $777 million as of Dec 29, 2023.
The long-term debt, net of the current portion, amounted to $4.64 billion as of Mar 29, 2024, compared with $4.66 billion as of Dec 29, 2023.
Net cash flow from operating activities totaled $63 million at the end of the first quarter of 2024 against cash outflow from operating activities worth $98 million recorded a year ago.
2024 Guidance
Leidos Holdings has raised its 2024 guidance. The company now expects to generate adjusted earnings in the range of $8.40-$8.80 per share, up from the prior guidance of $7.50-$7.90. The Zacks Consensus Estimate for LDOS’ 2024 earnings is pegged at $7.77 per share, lower than the company’s projected range.
LDOS currently expects 2024 revenues in the band of $16.0-$16.4 billion, up from the earlier guided range of $15.7-$16.1 billion. The Zacks Consensus Estimate for revenues is pegged at $15.97 billion, lower than the company’s guided range.
LDOS currently expects 2024 cash flow from operating activities to be $1.3 billion, up from the prior projection of $1.1 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 11.06% due to these changes.
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 a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Leidos has a Zacks Rank #1 (Strong 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, RTX (RTX - Free Report) , has gained 3.3% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
RTX reported revenues of $19.31 billion in the last reported quarter, representing a year-over-year change of +12.2%. EPS of $1.34 for the same period compares with $1.22 a year ago.
For the current quarter, RTX is expected to post earnings of $1.28 per share, indicating a change of -0.8% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
RTX has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.