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Should Leidos (LDOS) Stock Be in Your Portfolio Pre-Q2 Earnings?
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Leidos Holdings, Inc. (LDOS - Free Report) is scheduled to release second-quarter 2024 results on Jul 30, after market close.
The Zacks Consensus Estimate for revenues is pegged at $4.01 billion, implying a 4.5% improvement from the year-ago quarter's reported figure. The consensus mark for second-quarter earnings is pegged at $2.26 per share, suggesting a 25.6% surge from $1.85 reported in the prior-year quarter. The bottom-line estimate remained unchanged in the past 60 days.
Image Source: Zacks Investment Research
Leidos has an impressive earnings surprise history. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 23.43%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model predicts an earnings beat for LDOS this time around. 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, which is the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
LDOS currently generates revenues from its four segments — National Security and Digital, Health & Civil, Commercial & International and Defense Systems.
Organic growth due to increased sales volume for varied programs, like the Sentinel and DES, is likely to have bolstered National Security and Digital unit’s revenue performance in the to-be-reported quarter.
Solid sales volume from the managed health services business must have added an impetus to Health & Civil unit’s second-quarter top line.
Increased deliveries of security products and favorable commercial products mix can be expected to have boosted Commercial & International unit’s revenues. On the other hand, increased sales volume for Airborne ISR and Hypersonics businesses might have bolstered the Defense Systems unit’s revenues.
The expected strong performance from each of LDOS’ segments must have aided the company’s overall top line in the quarter.
A strong top-line expectation and improved supply chain, along with improved program execution and disciplined cost management initiatives taken by LDOS, are likely to have boosted Leidos' bottom-line performance.
Price Performance & Valuation
Leidos’ shares have exhibited an upward trend, gaining a notable percentage over the year-to-date period. Specifically, the stock soared 38.7% year to date, outperforming the Zacks aerospace-defense industry’s decline of 8.5%.
YTD Performance
Image Source: Zacks Investment Research
As evident from the image, other notable stocks from the same industry also gained year to date but lagged LDOS’ performance. Shares of Lockheed Martin (LMT - Free Report) , L3Harris Technologies (LHX - Free Report) and General Dynamics (GD - Free Report) rallied 13.7%, 12.6% and 9.7%, respectively, year to date.
From a valuation perspective, Leidos is trading at a discount when compared to its industry. Currently, LDOS is trading at 16.94X forward 12 months earnings, which is lower than the industry’s forward earnings multiple of 18.97X.
Price-to-Earnings (forward 12 Months)
Image Source: Zacks Investment Research
Investment Thesis
With widespread geopolitical and socioeconomic tensions disrupting global peace, defense contractors like Leidos have been successfully securing notable orders. Such contract wins remain a major growth catalyst for LDOS’ second-quarter revenues.
Moreover, considering the fact that the company’s product portfolio is not just limited to defense products, but also extends to the constantly evolving health sector and the steadily growing commercial aerospace market, such diversification offers economies of scale to LDOS, thereby boosting its financial performance.
However, high-interest rate environment in the U.S. economy poses a threat to this stock’s ability to retain its financial prowess. High-interest expenses might have contributed to LDOS’ elevated leverage, as evident from its long-term debt-to-capital ratio compared to that of its industry.
Image Source: Zacks Investment Research
Should You Keep LDOS or Not?
Despite the poor leverage LDOS faces at present, it might not be too much of a risk to make an entry for this stock, before coming Tuesday. This is because it is trading at a discount compared to its industry. This renowned defense contractor is less likely to disappoint with its second-quarter results, considering the solid annual growth expectation offered by its sales and earnings estimates as well as a positive Earnings ESP. So, those who already have LDOS in their portfolio may continue to keep it.
Image: Bigstock
Should Leidos (LDOS) Stock Be in Your Portfolio Pre-Q2 Earnings?
Leidos Holdings, Inc. (LDOS - Free Report) is scheduled to release second-quarter 2024 results on Jul 30, after market close.
The Zacks Consensus Estimate for revenues is pegged at $4.01 billion, implying a 4.5% improvement from the year-ago quarter's reported figure. The consensus mark for second-quarter earnings is pegged at $2.26 per share, suggesting a 25.6% surge from $1.85 reported in the prior-year quarter. The bottom-line estimate remained unchanged in the past 60 days.
Leidos has an impressive earnings surprise history. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 23.43%.
Earnings Whispers
Our proven model predicts an earnings beat for LDOS this time around. 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, which is the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Leidos has a Zacks Rank #3 and an Earnings ESP of +1.33%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Key Factors to Consider
LDOS currently generates revenues from its four segments — National Security and Digital, Health & Civil, Commercial & International and Defense Systems.
Organic growth due to increased sales volume for varied programs, like the Sentinel and DES, is likely to have bolstered National Security and Digital unit’s revenue performance in the to-be-reported quarter.
Solid sales volume from the managed health services business must have added an impetus to Health & Civil unit’s second-quarter top line.
Increased deliveries of security products and favorable commercial products mix can be expected to have boosted Commercial & International unit’s revenues. On the other hand, increased sales volume for Airborne ISR and Hypersonics businesses might have bolstered the Defense Systems unit’s revenues.
The expected strong performance from each of LDOS’ segments must have aided the company’s overall top line in the quarter.
A strong top-line expectation and improved supply chain, along with improved program execution and disciplined cost management initiatives taken by LDOS, are likely to have boosted Leidos' bottom-line performance.
Price Performance & Valuation
Leidos’ shares have exhibited an upward trend, gaining a notable percentage over the year-to-date period. Specifically, the stock soared 38.7% year to date, outperforming the Zacks aerospace-defense industry’s decline of 8.5%.
YTD Performance
As evident from the image, other notable stocks from the same industry also gained year to date but lagged LDOS’ performance. Shares of Lockheed Martin (LMT - Free Report) , L3Harris Technologies (LHX - Free Report) and General Dynamics (GD - Free Report) rallied 13.7%, 12.6% and 9.7%, respectively, year to date.
From a valuation perspective, Leidos is trading at a discount when compared to its industry. Currently, LDOS is trading at 16.94X forward 12 months earnings, which is lower than the industry’s forward earnings multiple of 18.97X.
Price-to-Earnings (forward 12 Months)
Investment Thesis
With widespread geopolitical and socioeconomic tensions disrupting global peace, defense contractors like Leidos have been successfully securing notable orders. Such contract wins remain a major growth catalyst for LDOS’ second-quarter revenues.
Moreover, considering the fact that the company’s product portfolio is not just limited to defense products, but also extends to the constantly evolving health sector and the steadily growing commercial aerospace market, such diversification offers economies of scale to LDOS, thereby boosting its financial performance.
However, high-interest rate environment in the U.S. economy poses a threat to this stock’s ability to retain its financial prowess. High-interest expenses might have contributed to LDOS’ elevated leverage, as evident from its long-term debt-to-capital ratio compared to that of its industry.
Should You Keep LDOS or Not?
Despite the poor leverage LDOS faces at present, it might not be too much of a risk to make an entry for this stock, before coming Tuesday. This is because it is trading at a discount compared to its industry. This renowned defense contractor is less likely to disappoint with its second-quarter results, considering the solid annual growth expectation offered by its sales and earnings estimates as well as a positive Earnings ESP. So, those who already have LDOS in their portfolio may continue to keep it.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.