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Monday, shares of Leidos Holdings (NYSE:LDOS) remained steady following Jefferies reiterating a Hold rating and a $155.00 price target. The firm’s analyst pointed out a recent minor setback for the company, involving the cancellation of a small task order within the Social Security Administration IT Support Service Contract (ITSSC) II vehicle, which is less than $1 million of the total $300 million contract revenues. This cancellation pertains specifically to a single data field and does not significantly impact the overall contract. According to InvestingPro data, the stock is currently trading near its 52-week low of $123.22, with analysis suggesting the shares are undervalued relative to their Fair Value.
The analyst also noted potential future pressures on Leidos, including the effect of government layoffs on procurement cycles and a minor revenue impact from the company’s work with the National Institutes of Health (NIH), estimated at around 0.3 percentage points. Despite these concerns, Jefferies forecasts a 3% organic growth for Leidos in 2025, with the Health & Civil segment expected to see a 1% increase.
Leidos, a company specializing in technology and engineering services, particularly for defense and intelligence agencies, has been navigating the complexities of government contracting, which often involves long procurement cycles and strict compliance requirements. With a market capitalization of $16.9 billion and revenue of $16.7 billion in the last twelve months, Leidos stands as a prominent player in the Professional Services industry. The analyst’s comments suggest that while there are some areas of concern, the overall outlook for the company remains stable. For deeper insights into Leidos’s financial health and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US equities with expert analysis and actionable intelligence.
The steady price target indicates that Jefferies believes Leidos is fairly valued at its current levels, considering both the opportunities and challenges it faces. The Hold rating suggests that investors maintain their current positions in the stock without making additional investments at this time.
Investors and stakeholders will continue to monitor Leidos’s performance closely, particularly in relation to government spending patterns and the company’s ability to adapt to changes within the federal contracting environment.
In other recent news, Leidos Holdings reported fourth-quarter earnings that exceeded analyst expectations, with adjusted earnings per share reaching $2.37, surpassing the estimate of $2.26. The company’s revenue for the quarter was $4.37 billion, exceeding the consensus estimate of $4.13 billion and marking a 10% year-over-year increase. Leidos also issued a positive outlook for fiscal year 2025, projecting earnings per share between $10.35 and $10.75, above the consensus of $10.11, and revenue between $16.9 billion and $17.3 billion, higher than the $16.43 billion expected by analysts. Additionally, Leidos has initiated a $500 million accelerated share repurchase agreement to buy back its common stock, reflecting its strategy to manage capital and return value to shareholders.
The company also issued $1 billion in senior unsecured notes, with proceeds intended for repurchasing outstanding notes, repaying loans, and potentially financing acquisitions. Jefferies analyst Sheila Kahyaoglu recently adjusted the price target for Leidos stock to $155 from $160, maintaining a Hold rating, following the company’s report of an 8% increase in organic revenue growth and a 29% rise in EBITDA for 2024. Despite these positive financial results, the company’s conservative growth guidance for 2025 has led to a cautious market response. Leidos has demonstrated improvement in free cash flow, achieving a 90% conversion rate in 2024 and anticipating an 87% rate in 2025. These developments highlight the company’s ongoing efforts to strengthen its financial position and navigate the competitive landscape.
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