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Leidos Holdings' (LDOS) Q1 Earnings Top, 2019 EPS View Up

Zacks Equity Research

Leidos Holdings, Inc.’s LDOS first-quarter 2019 adjusted earnings of $1.13 per share surpassed the Zacks Consensus Estimate of 99 cents by 14.1%. The bottom line also increased 9.7% from $1.03 per share registered a year ago.

Moreover, the company’s GAAP earnings of $1.29 per share surged 95.5% from the year-ago figure of 66 cents.

The year-over-year bottom-line improvement can be attributed to solid revenues and operating income growth.

Leidos Holdings, Inc. Price, Consensus and EPS Surprise

Leidos Holdings, Inc. Price, Consensus and EPS Surprise | Leidos Holdings, Inc. Quote

Total Revenues

Leidos Holdings generated total revenues of $2,577 million in the quarter under consideration, which exceeded the Zacks Consensus Estimate of $2,519 million by 2.3%. The top line also improved 5.5% year over year backed by growth across all the segments.


At the end of the reported quarter, the company’s total backlog was $21.5 billion compared with $20.8 billion at 2018 end. Of this total backlog, $6.1 billion was funded.

Operational Statistics

Total cost of revenues in the quarter under review increased by 6.5% to $2,221 million. Operating income totaled $192 million compared with $159 million in the year-ago period. This upside was driven by decreases in integration and restructuring costs, lower amortization of intangible assets and an asset impairment charge that Leidos incurred in the prior-year quarter.

As a result, the operating margin expanded to 7.5% from 6.5% in the year-ago quarter.

Interest expenses summed $38 million compared with $34 million in the prior-year quarter.

Segmental Performance

Defense Solutions: Net revenues at this segment improved 6.6% to $1,267 million from the prior-year figure of $1,189 million. This upside can be primarily attributed to new awards that the segment received in the quarter under review. Also, net increase in program volumes contributed to the top line.

However, the segment’s operating income slipped to $89 million from the year-ago income of $90 million, with the operating margin having contracted 60 basis points (bps) to 7%.

Health: The segment recorded revenues of $463 million in the first quarter, up 8.9% year over year. The improvement was primarily driven by a net increase in program volumes and new awards.

Operating income improved 7.1% to $45 million, while operating margin contracted 20 bps to 9.7.7%.

Civil: Revenues at this segment amounted to $847 million, up 2.2%. This uptick was mainly on account of new awards.

While operating income rose 5.8% to $73 million, operating margin expanded 30 bps to 8.6%.


Cash and cash equivalents as of Mar 29, 2019, were $536 million compared with $327 million as of Dec 28, 2018. Net cash provided by operating activities in the first quarter of 2019 was $288 million compared with $22 million a year ago.

2019 Guidance

Leidos Holdings partially revised its outlook for 2019. The company currently expects its adjusted earnings to be in the $4.30-$4.65 range, up from $4.25-$4.60 anticipated earlier. The Zacks Consensus Estimates for 2019 earnings, pegged at $4.53, is above the mid-point of the company’s projected view.

However, Leidos Holdings continues to expect revenues in the range of $10.5-$10.9 billion this year. The Zacks Consensus Estimates for 2019 revenues, pegged at $10.70 billion, is in line with the mid-point of the company guided range.

The company’s cash flow from operating activities is anticipated to be around $825 millionat 2019 end, up from prior guidance of $725 million.

Zacks Rank

Leidos Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Defense Releases

Textron Inc. TXT reported first-quarter 2019 earnings from continuing operations of 76 cents per share, which surpassed the Zacks Consensus Estimate of 70 cents by 8.6%.

Lockheed Martin Corp.’s LMT first-quarter 2019 earnings came in at $5.99 per share, which outpaced the Zacks Consensus Estimate of $4.29 by 39.6%.

Hexcel Corporation HXL reported first-quarter 2019 earnings of 84 cents per share, which exceeded the Zacks Consensus Estimate of 79 cents by 6.3%.

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