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Leidos Completes Acquisition Of Gibbs & Cox Acquisition; Ups Guidance For FY21

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Leidos Holdings (LDOS) has completed the acquisition of Gibbs & Cox for $380 million. The company will merge with Leidos' maritime systems division, where it will operate as a wholly-owned subsidiary.

With the acquisition, the science and technology company gains access to an independent ship design company.

Gibbs & Cox will provide Leidos with experienced designers and engineers specializing in the design and development of naval vessels. It will also position Leidos as a leading provider of engineering solutions to the U.S. Navy and foreign navies.

“Gibbs & Cox will remain the nation’s largest independent provider of maritime services. The combination of our world-class naval architecture, design and engineering services with Leidos’ speed, security and scale will significantly enhance our combined offerings in the fast growing maritime undersea, autonomous and cyber security segments,” said Chris Deegan, Gibbs & Cox CEO.

The acquisition of Gibbs & Cox, first announced in February, comes on the heels of Leidos reporting impressive Q1 financial results. Revenues were up 14.7% year-over-year to $3.32 billion. Operating income was up 60.4% compared to Q1 2020, to $308 million. Diluted EPS of $1.42 was reported during the quarter, vs. $0.80 in the comparable quarter of 2019.

In line with its robust results, the company has increased its non-GAAP EPS guidance to between $6.35 and $6.65 for full-year 2021. (See Leidos stock analysis on TipRanks)

Stifel analyst Joseph DeNardi has since reiterated a Buy rating on the stock. According to the analyst, Leidos has been able to obscure the factors hindering its progress recently, such as COVID-19 and softness from its flagging airport business.

DeNardi stated, “We believe Leidos has the best visibility into revenue growth over the next ~12-24 months and believes this bodes well for valuation and current risk/reward.”

He continued, "We like Leidos' positioning in a tougher budget environment, its ability to benefit from a re-opening through its airport business, and its recent track record of gaining share and winning large pursuits."

The analyst has since reiterated a $115 price target, implying 10.55% upside potential to current levels.

Consensus among analysts on Wall Street is a Strong Buy based on 9 Buy and 1 Hold ratings. The average analyst price target of $114.78 implies 10.33% upside potential to current levels.

LDOS scores an 8 out of 10 on TipRanks’ Smart Score rating tool, implying it is likely to outperform the overall market.

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