It's been a good week for Leidos Holdings, Inc. (NYSE:LDOS) shareholders, because the company has just released its latest annual results, and the shares gained 6.4% to US$120. Leidos Holdings reported US$11b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$4.60 beat expectations, being 3.4% higher than what analysts expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Following the latest results, Leidos Holdings's eight analysts are now forecasting revenues of US$12.8b in 2020. This would be a meaningful 16% improvement in sales compared to the last 12 months. Statutory per share are forecast to be US$4.62, approximately in line with the last 12 months. Before this earnings report, analysts had been forecasting revenues of US$11.7b and earnings per share (EPS) of US$4.83 in 2020. So it's pretty clear consensus is mixed on Leidos Holdings after the latest results; while analysts lifted revenue numbers, they also administered a small dip in per-share earnings expectations.
Curiously, the consensus price target rose 9.8% to US$115. We can only conclude that the forecast revenue growth is expected to offset the impact of the expected fall in earnings. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Leidos Holdings at US$135 per share, while the most bearish prices it at US$90.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We can infer from the latest estimates that analysts are expecting a continuation of Leidos Holdings's historical trends, as next year's forecast 16% revenue growth is roughly in line with 17% annual revenue growth over the past five years. Compare this with the wider market, which analyst estimates (in aggregate) suggest will see revenues grow 11% next year. So although Leidos Holdings is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider market.
The Bottom Line
The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Leidos Holdings. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Leidos Holdings going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Leidos Holdings's balance sheet, and whether we think Leidos Holdings is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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