Leidos Holdings (LDOS) Q1 Earnings Meet Estimates, Sales Lag

Leidos Holdings, Inc. (NYSE:LDOS) reported first-quarter 2018 adjusted earnings of $1.03 per share, which came in line with the Zacks Consensus Estimate. Earnings improved 17% from the year-ago quarter's figure of 88 cents.

Excluding one-time items, the company reported GAAP earnings of 66 cents per share, compared with the prior-year quarter’s earnings of 47 cents.

Total Revenues

Leidos Holdings posted total revenues of $2,443 million in the quarter, which missed the Zacks Consensus Estimate of $2,596 million by 5.9%. The figure also deteriorated 5.3% year over year.

Backlog

At the end of the first quarter, the company’s backlog of signed business orders was $17.6 billion, of which $4.6 billion was funded. Total backlog at the end of 2017 was $17.5 billion, of which $5 billion was funded.

Operational Statistics

Total cost of revenues in the reported quarter declined 6.6% to $2,086 million. Operating income was $159 million, compared with $141 million in the year-ago quarter.

Interest expenses totaled $34 million, down from $36 million in first-quarter 2017.

Segment Performance

Defense Solutions: Net sales at the segment dropped 9% to $1,178 million from the prior-year figure of $1,294 million. However, operating income improved 7.6% to $85 million from the year-ago tally of $79 million. Meanwhile, operating margin expanded 110 basis points (bps) to 7.2%.

Health: The segment recorded net sales of $425 million in the reported quarter, down 4.1%. While operating income declined 10.6% to $42 million, operating margin contracted 70 bps to 9.9%.

Civil: Net sales at the segment were $840 million, down 0.2%. Operating income improved 37% to $74 million and operating margin expanded 240 bps to 8.8%.

Financials

Cash and cash equivalents as of Mar 30, 2018, were $215 million, compared with $390 million as of Dec 29, 2017. Net cash inflow from operating activity in first-quarter 2018 was $22 million, compared with cash outflow from operating activity of $71 million a year ago.

Guidance

Leidos Holdings reaffirmed 2018 guidance. The company continues to expect adjusted earnings per share in the range of $4.15-$4.50 on revenues of $10.25-$10.65 billion.

Adjusted EBITDA margin is anticipated in the range of 10.1-10.4%. Leidos Holdings expects to generate cash flow from operating activities of $675 million or more in 2018.

Zacks Rank

Leidos Holdings currently carries a Zacks Rank #4 (Sell).

Other Defense Releases

Huntington Ingalls Industries, Inc.’s (NYSE:HII) first-quarter 2018 earnings of $3.48 per share missed the Zacks Consensus Estimate of $4.07 by 14.5%. It carries a Zacks Rank #3 (Hold).

L3 Technologies (NYSE:LLL) posted first-quarter 2018 earnings of $2.34 per share from continuing operations, surpassing the Zacks Consensus Estimate of $1.99 by 2.2%.It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Spirit AeroSystems Holdings, Inc. (NYSE:SPR) reported first-quarter 2018 earnings of $1.10 per share, which missed the Zacks Consensus Estimate of $1.35 by 18.5%. It carries a Zacks Rank #3.

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