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On Friday, Leidos Holdings (NYSE:LDOS), currently trading at $139.67 with a market capitalization of $17.91 billion, maintained its Overweight rating by analysts at Cantor Fitzgerald, along with a price target (PT) of $185. The firm's valuation of Leidos Holdings is based on a combination of two evaluation methods: 50% on the enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) and 50% on the free cash flow (FCF) yield, both projected for the fiscal year 2026. According to InvestingPro data, the company's current EV/EBITDA ratio stands at 10.66x, with analysts' targets ranging from $144 to $220.
The analysts at Cantor Fitzgerald have identified several factors that could impact the company's performance. They acknowledge that while there are risks to Leidos' Civil business and potential challenges in Aero growth and Defense scaling, these could be counterbalanced by multiple growth opportunities within the Defense and Intelligence sectors. InvestingPro analysis shows the company maintains strong financial health with an overall score of "GREAT" and has demonstrated solid performance with a 7.93% revenue growth in the last twelve months.
The risks highlighted by Cantor Fitzgerald include the possibility of slower growth in government budgets, particularly for Civil and Health segments, and fixed-price execution risks across Aero, Defense, and International programs. Additionally, the firm notes the potential for cost-plus conversion risks stemming from changes in government contracting practices. Worth noting, InvestingPro data reveals the company has maintained dividend payments for 14 consecutive years and operates with a moderate level of debt, suggesting financial stability. For detailed analysis and additional insights, investors can access the comprehensive Pro Research Report available on InvestingPro.
Further concerns are raised regarding the pace of Aerospace traffic growth and the potential slowdown in IT modernization spending for large-scale enterprise contracts. These factors are part of the complex landscape in which Leidos Holdings operates, and they could influence the company's sales trajectory.
Despite these risks, the Overweight rating suggests that Cantor Fitzgerald remains confident in the company's ability to navigate these challenges and capitalize on the growth opportunities within its market. The $185 price target reflects this optimism and the firm's assessment of Leidos Holdings' valuation based on their financial analysis.
In other recent news, Leidos reported annual revenues of approximately $16.7 billion for the fiscal year ending January 3, 2025. The company has secured a $390 million contract with the National Security Agency (NSA) to provide signals intelligence capabilities and engineering services. This contract includes a base year with four additional option years and underscores Leidos' commitment to supporting military and intelligence operations. Additionally, Leidos has partnered with Moveworks to enhance government efficiency through agentic artificial intelligence solutions, aiming to streamline administrative tasks for government workers in the U.S., U.K., and Australia.
In another development, Leidos experienced a setback as the U.S. Department of Defense canceled a software project involving Leidos and Oracle (NYSE:ORCL), which was over budget and behind schedule. The project's cancellation, valued at around $75 million for Leidos, reflects the Pentagon's cost-cutting measures. Furthermore, Leidos has advanced the digital infrastructure of the U.K. Ministry of Defence by migrating its Support Chain Integration Platform to the Amazon (NASDAQ:AMZN) Web Services cloud. This move is expected to enhance operational agility and security for the Ministry of Defence. These recent developments highlight Leidos' ongoing efforts in digital modernization and government support.
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