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Leidos Wins $12.6B Navy Deal to Support Aircraft Readiness

Zacks Equity Research

Leidos Holdings Inc. LDOS recently announced that it received a contract from the U.S. Navy's Naval Air Systems Command to provide flexible, ready and rapidly deployable capabilities for aviation systems worldwide.

Leidos’ expertise in solving the tough challenges involving defense and intelligence will enable it to bring enterprise perspective, best-in-industry capability and the engineering discipline, which maximize its technical expertise as a full spectrum global aviation services provider.

The multiple award, hybrid contract has a five-year base period of performance with five optional years, and a total potential value of $12.6 billion.

Importance of Readiness

Undoubtedly the U.S. defense arsenal and provisions are miles ahead of any other nation. Nevertheless, synchronization of the different sets of system and people involved in the process provide a nation added advantage in hostile situations.

In the modern warfare most the wars are won in air as fighter aircraft not only provides support the troops on ground but initiates the move to break the enemy lines.

Leidos’ knowledge in operational and integration areas will help to provide rapid solutions for U.S. Navy worldwide.

Leidos’ Backlog Continues to Swell

Leidos’ ability to provide cost-effective defense solutions to the Pentagon as well as other U.S. allies has been serving as a primary growth driver for it. In fact, these contract wins tend to bolster the company’s backlog. Evidently, at the end of fourth-quarter 2018, Leidos’ total backlog was $20.8 billion compared with $20.3 billion at the third-quarter end.

We expect its capability to provide solutions in the fields of cybersecurity; data analytics; enterprise IT modernization; operations and logistics; sensors, collection and phenomenology; software development; and systems engineering will enable it to win more defense contracts.

Zacks Rank & Price Movement

Leidos currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company’s shares have returned 13% in the past three months, marginally outperforming its  industry’s rise of 12.9%.

Defense Budget

President Donald Trump unveiled his budget proposal of $4.7 trillion for fiscal 2020 and he proposed a 5% or $34 billion increase in defense spending to a total of $750 billion, up from $716 billion.

The proposed increase  will benefit the major defense players like Lockheed Martin Corporation LMT, Boeing Company BA and Northrop Grumman Corporation NOC among others. The high-quality products and services provided by these defense players ensure steady contract flow from the different U.S. Defense departments.
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Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
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