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What Lies Ahead for Leidos Holdings (LDOS) in Q1 Earnings?

Zacks Equity Research

Leidos Holdings, Inc. LDOS is scheduled to release first-quarter 2020 results on May 5, after market close. In the last reported quarter, the company delivered a positive earnings surprise of 11.85%.

Moreover, Leidos Holdings has a four-quarter positive earnings surprise of 11.19%, on average.

Let’s discuss the factors that are likely to get reflected in the upcoming quarterly results.

Factors at Play

Toward the end of January 2020, Leidos Holdings completed the acquisition of Dynetics. Notably, positive synergies from this buyout are expected to have bolstered the company’s first-quarter performance.

With Leidos Holdings generating almost half of its revenues from the Defense Solutions segment, a steady order growth from Pentagon and other U.S. allies are expected to have boosted defense revenues.  

Further, at the onset of the quarter, Leidos Holdings announced a strategic alliance with Clarify Health Solutions. The tie-up entails Leidos Holdings to deliver innovative analytics solutions to healthcare partners, using its careC2 platform along with Clarify Health's predictive analytics.

Such a development must have boosted new program revenues for the company in the to-be-reported quarter. Considering these factors, we remain optimistic about Leidos Holdings’ top-line performance.

Notably, the Zacks Consensus Estimate for first-quarter revenues is pegged at $2.88 billion, which indicates a rise of 11.9% from the year-ago quarter’s reported figure.

The expected revenue growth along with segmental operating margin growth is likely to boost the bottom line. The Zacks Consensus Estimate for first-quarter earnings per share is pegged at $1.24, which indicates rise of 9.7% from the year-ago quarter’s reported figure.

Also during the quarter, Leidos Holdings announced that it has entered into a definitive agreement to acquire L3Harris Technologies’ LHX Security Detection and Automation businesses, for $1 billion in cash. We expect the company to give further update on the agreement in its upcoming release.

Leidos Holdings, Inc. Price and EPS Surprise

Leidos Holdings, Inc. Price and EPS Surprise

Leidos Holdings, Inc. price-eps-surprise | Leidos Holdings, Inc. Quote

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Leidos Holdings 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. But this is not the case here.

Earnings ESP: The company’s Earnings ESP is -14.22%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Leidos Holdings carries a Zacks Rank #3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are some defense companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Spirit Aerosystems Holdings, Inc. SPR is scheduled to report first-quarter 2020 results on May 6. The company has an Earnings ESP of +18.35% and a Zacks Rank #3.

Huntington Ingalls Industries HII is scheduled to report first-quarter 2020 results on May 7. The company has an Earnings ESP of +1.79% and a Zacks Rank #3.

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Spirit Aerosystems Holdings, Inc. (SPR) : Free Stock Analysis Report
 
Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report
 
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
 
L3Harris Technologies Inc (LHX) : Free Stock Analysis Report
 
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