Results: Leidos Holdings, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates
Last week, you might have seen that Leidos Holdings, Inc. (NYSE:LDOS) released its third-quarter result to the market. The early response was not positive, with shares down 2.8% to US$136 in the past week. It looks like a credible result overall - although revenues of US$4.6b were in line with what the analysts predicted, Leidos Holdings surprised by delivering a statutory profit of US$3.28 per share, a notable 18% above expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Leidos Holdings after the latest results.
Following the latest results, Leidos Holdings' 14 analysts are now forecasting revenues of US$18.8b in 2027. This would be a reasonable 5.5% improvement in revenue compared to the last 12 months. Statutory per share are forecast to be US$11.45, approximately in line with the last 12 months. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$19.1b and earnings per share (EPS) of US$11.69 in 2027. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.
See our latest analysis for Leidos Holdings
The consensus price target held steady at US$152, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Leidos Holdings, with the most bullish analyst valuing it at US$225 and the most bearish at US$127 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Leidos Holdings' revenue growth is expected to slow, with the forecast 4.4% annualised growth rate until the end of 2027 being well below the historical 5.8% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.1% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Leidos Holdings.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Leidos Holdings. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$152, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Leidos Holdings analysts - going out to 2028, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Leidos Holdings that you should be aware of.
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