Should You Buy, Hold or Sell Leidos Stock Before Q4 Earnings Release?

Leidos Holdings, Inc. LDOS is scheduled to release fourth-quarter and full-year 2024 results on Feb. 11, before market open. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The Zacks Consensus Estimate for revenues is pegged at $4.12 billion, implying a 3.6% improvement from the year-ago quarter's reported figure. The consensus mark for fourth-quarter earnings is pegged at $2.18 per share, suggesting a 9.6% surge from $1.99 reported in the prior-year quarter. The bottom-line estimate has moved up 0.9% in the past 60 days.Image Source: Zacks Investment ResearchLeidos has an impressive earnings surprise history. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 29.92%.Image Source: Zacks Investment ResearchEarnings WhispersOur 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 #2 and an Earnings ESP of +12.08%. You can see the complete list of today’s Zacks #1 Rank stocks here.Key Factors to ConsiderLDOS currently generates revenues from its four segments — National Security and Digital, Health & Civil, Commercial & International and Defense Systems.Solid sales volume from varied programs, particularly across its digital modernization portfolio, is likely to have bolstered the National Security and Digital unit’s revenue performance in the to-be-reported quarter.Solid sales volume from the managed health services business as well as an increase in net write-ups on certain programs must have boosted the Health & Civil unit’s fourth-quarter top line. Increased deliveries of security products and energy engineering services, along with a favorable commercial product mix, can be expected to have boosted the Commercial & International unit’s revenues. On the other hand, increased sales volume for the Airborne ISR and Hypersonics businesses might have bolstered the Defense Systems unit’s revenues.The expected strong performance from each of LDOS’ segments is likely to have aided the company’s overall top-line figures.A strong top-line expectation, along with improved program execution, lower diluted share count and net interest expense, and disciplined cost management initiatives are expected to have boosted Leidos' bottom-line performance.Price Performance & ValuationLeidos’ shares have exhibited an upward trend, gaining a notable percentage over the past year. Specifically, the stock soared 25.9% in the past year, outperforming the Zacks aerospace-defense industry’s decline of 3.5%. It also outpaced the broader Zacks Aerospace sector’s return of 6.1% as well as the S&P 500’s gain of 23.5% in the said time frame.Image Source: Zacks Investment ResearchOther notable stocks from the same industry have also gained over the past year. Shares of RTX Corp. RTX, Lockheed Martin LMT and Northrop Grumman NOC have rallied 40%, 5.4% and 5%, respectively, year to date.  From a valuation perspective, Leidos is trading at a discount when compared to its industry. Currently, LDOS is trading at 13.65X forward 12-month earnings, lower than the industry’s forward earnings multiple of 21.92X. Price-to-Earnings (forward 12 Months)Image Source: Zacks Investment ResearchInvestment ThesisWith 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, some industry-specific setbacks, like supply-chain challenges and a shortage of skilled labor, continue to pose risks for Leidos Holdings. In particular, the limited availability of critical materials like semiconductors and rare earth elements vital for defense technologies has been providing notable challenges to defense contractors like Leidos.On the other hand, according to a May 2023 workforce study on the aerospace and defense industry conducted by PwC for the Aerospace Industries Association, large number of retirement-aged employees with specialized skills, long tenures and deep institutional knowledge may be preparing to leave the workforce, potentially exacerbating the lack of needed skills. Such labor shortages might cause Leidos to default on its delivery of finished products to the commercial aviation industry, which may affect its future operating results.Should You Buy LDOS Before Feb. 11?To conclude, investors interested in LDOS may add this stock to their portfolio before Tuesday, considering its discounted valuation. This renowned defense contractor is less likely to disappoint with its fourth-quarter results, considering the solid annual growth expectation offered by its sales and earnings estimates as well as a positive Earnings ESP. Moreover, LDOS currently has a VGM Score of A, which is also a favorable indicator of strong performance. 7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>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 Lockheed Martin Corporation (LMT): Free Stock Analysis Report Northrop Grumman Corporation (NOC): Free Stock Analysis Report Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report RTX Corporation (RTX): 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