Leidos (LDOS) Down 11.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Leidos (LDOS). Shares have lost about 11.7% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Leidos due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers. Leidos Holdings Beats on Q3 Earnings & Revenues, Raises '24 EPS ViewLeidos Holdings' third-quarter 2024 adjusted earnings of $2.93 per share beat the Zacks Consensus Estimate of $1.96 by 49.5%. The bottom line also increased 44.3% from $2.03 registered in the prior-year quarter.The year-over-year upside was driven by increased volumes on managed health services programs and improved program execution and cost control across the company.LDOS reported GAAP earnings of $2.68 per share, implying a significant improvement from the prior-year loss of $2.91 per share.Total RevenuesTotal revenues of $4.19 billion beat the Zacks Consensus Estimate of $4.05 million by 3.6%.The top line also improved 6.9% year over year, driven by increased demand across all customer segments, especially for managed health services.BacklogThe company recorded a total backlog of $40.56 billion, up from $36.49 billion in the second quarter of 2024. Of this amount, $9.09 billion was funded.Operational StatisticsThe cost of revenues increased 2.8% year over year to $3,428 million. The company reported an operating income of $516 million against an operating loss of $336 million in the year-ago quarter.The adjusted operating margin was 13.4% compared with 10.7% in the prior-year period.Interest expenses totaled $46 million, down 13.2% year over year.Segmental PerformanceNational Security and Digital: Net revenues in this segment improved 0.7% year over year to $1.87 billion. The increase can be attributed to increased volumes from several enterprise Information Technology programs.This segment’s adjusted operating income increased to $195 million from the year-ago level of $182 million. The segment’s adjusted operating margin was 10.5%, up 70 basis points (bps) from the prior-year figure of 9.8%.Health & Civil: The segment recorded revenues of $1.23 billion, up 16.1% year over year. This improvement can be attributed to increased volumes and case complexity within the managed health services business as well as net write-ups on certain programs.This unit’s adjusted operating income totaled $297 million compared with $174 million in the year-ago quarter. The segment’s adjusted operating margin was 24.2%, up 770 bps year over year.Commercial & International: Revenues in this segment amounted to $578 million, up 4.7% year over year. The upside was driven by increased deliveries of security products and commercial energy engineering services.This segment recorded an adjusted operating income of $51 million, which came in line with the year-ago recorded figure. The adjusted operating margin was 8.8%, down 40 bps year over year.Defense Systems: Revenues in this segment amounted to $522 million, up 13% year over year. The upside was driven by increased scope and improved program execution on fixed price development programs.This segment recorded an adjusted operating income of $53 million compared with $34 million in the year-ago period. The adjusted operating margin was 10.2%, up 280 bps year over year.FinancialsCash and cash equivalents as of Sept. 27, 2024, totaled $1,185 million compared with $777 million as of Dec. 29, 2023.The long-term debt, net of the current portion, amounted to $4.08 billion as of Sept. 27, 2024, compared with $4.66 billion as of Dec. 29, 2023.Net cash flow from operating activities totaled $1.09 billion at the end of the third quarter of 2024 compared with $0.86 billion recorded a year ago.2024 GuidanceLeidos Holdings has raised its 2024 guidance. The company now expects to generate adjusted earnings in the range of $9.80-$10.00 per share, up from the prior guidance of $8.60-$9.00. The Zacks Consensus Estimate for earnings is pegged at $8.96 per share, lower than the company’s new guided range.LDOS currently expects 2024 revenues to be in the band of $16.35-$16.45 billion, higher than the earlier guidance of $16.10-$16.40 billion. The Zacks Consensus Estimate for revenues is pegged at $16.27 billion, lower than the company’s new guided range.The company currently expects cash flow from operating activities of $1.35 billion in 2024 compared to the earlier guidance of $1.30 billion.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in fresh estimates.The consensus estimate has shifted 5.37% due to these changes.VGM ScoresCurrently, Leidos has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly 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 PlayerLeidos belongs to the Zacks Aerospace - Defense industry. Another stock from the same industry, Textron (TXT), has gained 3.7% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.Textron reported revenues of $3.43 billion in the last reported quarter, representing a year-over-year change of +2.5%. EPS of $1.40 for the same period compares with $1.49 a year ago.Textron is expected to post earnings of $1.39 per share for the current quarter, representing a year-over-year change of -13.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -7.9%.Textron has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.Free: 5 Stocks to Buy As Infrastructure Spending SoarsTrillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. In addition to roads and bridges, this flood of cash will pour into AI data centers, renewable energy sources and more.In, you’ll discover 5 surprising stocks positioned to profit the most from the spending spree that’s just getting started in this space.Download How to Profit from the Trillion-Dollar Infrastructure Boom absolutely free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report Textron Inc. (TXT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks