Leidos Holdings, Inc.’s (LDOS Quick QuoteLDOS - Free Report) second-quarter 2024 adjusted earnings of $2.63 per share beat the Zacks Consensus Estimate of $2.26 by 16.4%. The bottom line also increased 46.1% from $1.80 registered in the prior-year quarter.

The year-over-year upside was driven by increased volumes and higher earned incentives on managed health services and improved cost control across the company. 

LDOS reported GAAP earnings of $2.37 per share, up from the prior-year quarter’s level of $1.50.

Total Revenues

Total revenues of $4.13 billion beat the Zacks Consensus Estimate of $4.04 million by 2.2%.

The top line also improved 7.7% year over year, driven by increased demand across all customer segments, especially for managed health services.

Backlog

The company recorded a total backlog of $36.49 billion, down from $36.57 billion in the first quarter of 2024. Of this amount, $8.02 billion was funded.

Operational Statistics

The cost of revenues increased 4.8% year over year to $3,427 million. The company reported an operating income of $475 million compared with $331 million in the year-ago quarter.

The adjusted operating margin was 12.7% compared with 10.1% in the prior-year period.

Interest expenses totaled $51 million, down 8.9% year over year.

Segmental Performance

National Security and Digital: Net revenues in this segment improved 1.2% year over year to $1.81 billion. The increase can be attributed to increased volumes from the Sentinel contract, Defense Enclave Services (“DES”) program and several contracted research as well as development efforts. 

This segment’s adjusted operating income increased to $188 million from the year-ago quarter’s level of $183 million. The segment’s adjusted operating margin was 10.4%, up 20 basis points (bps) from the prior-year quarter’s 10.2%.

Health & Civil: The segment recorded revenues of $1.26 billion, up 22.1% 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 $314 million compared with $145 million in the year-ago quarter. The segment’s adjusted operating margin was 24.9%, up 1,090 bps year over year.

Commercial & International: Revenues in this segment amounted to $561 million, up 3.7% year over year. The upside was driven by increased deliveries of security products and higher volumes within the commercial energy and Australian IT businesses.

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 $495 million, up 6.2% 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 $4 million compared with $45 million in the year-ago period. The adjusted operating margin was 0.7%, down 750 bps year over year.

Financials

Cash and cash equivalents as of Jun 28, 2024, totaled $823 million compared with $777 million as of Dec 29, 2023.

The long-term debt, net of the current portion, amounted to $4.11 billion as of Jun 28, 2024, compared with $4.66 billion as of Dec 29, 2023.

Net cash flow from operating activities totaled $437 million at the end of the second quarter of 2024 compared with $66 million recorded a year ago.

2024 Guidance

Leidos Holdings has partially raised its 2024 guidance. The company now expects to generate adjusted earnings in the range of $8.60-$9.00 per share, up from the prior guidance of $8.40-$8.80. The Zacks Consensus Estimate for earnings is pegged at $8.75 per share, lower than the mid-point of the company’s projected range.

LDOS currently expects 2024 revenues to be in the band of $16.10-$16.40 billion, narrower than the earlier guidance of $16.0-$16.4 billion. The Zacks Consensus Estimate for revenues is pegged at $16.12 billion, lower than the mid-point of the company’s new guided range.

The company continues to expect cash flow from operating activities of approximately $1.3 billion in 2024.

Zacks Rank

Leidos Holdings currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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