Opinions The Monthly Gems by Allan Tong
LeidosLDOSTOP PICKNov 04, 2025
Stock price when the opinion was issued
As of Jun 03, 2026. Market Open.
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Premium contentA month ago, this defense company reported total revenues of $3.98 billion which beat the street's $3.8 billion and rose 4.2% year-over-year as operating income climbed from $265 million to $415 million (all USD) in that time. The operating margin expanded from 7.2% to 10.4% as total incomes declined 9.3%. The future looks positive with a backlog of $36.57 billion. To cap it off, the company raised its full-year earnings guidance from $7.50-7.90 to $8.40-8.80 per share and cash flow from $1.1 billion to $1.3 billion. After Leidos reported this beat, the stock and made fresh 52-week highs in the weeks that followed. It's come back a bit which makes it an attractive entry point.
LDOS is a $20B market cap company providing scientific, engineering and technical services. The stock is up 36% YTD and 90% over one year. It trades at 16X earnings, with a 1.03% dividend. Historical growth has been very solid, and it generates good cash flow. The last quarter was excellent and EPS beat estimates by 35%. Estimates have also been moving up. There is a lot to like here for sure. Our main concern would be debt, at about 4X cash flow. But based on its growth and execution we would not see this as particularly problematic.
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Over the last two years, LDOS has beaten revenue estimates each quarter by an average of 3.3%. On Nov. 4, they reported earnings of $3.05 per share, smoking the street's consensus of $2.71, while revenue topped a record $4.5 billion, up 7% over the year, and once more way ahead of the $4.28 billion estimate. Organic revenue growth was 6%. In the previous quarter, Leidos reported revenues of $4.25 billion, up 2.9% year-over-year, a solid beat. Q2 EPS came in at $3.21, beating the expected $2.66.