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Investing.com - UBS raised its price target on Leidos Holdings (NYSE:LDOS) to $184.00 from $168.00 while maintaining a Neutral rating, citing impressive margin performance despite an uncertain government spending environment. The stock, currently trading at $175.43, has surged 9.3% in the past week, with InvestingPro data showing a "GREAT" financial health score of 3.21 out of 5.
The defense contractor reported a second-quarter earnings beat and raised guidance, with UBS noting that bookings have largely held up. With revenue growing at 6.53% over the last twelve months to $17.05 billion and a healthy P/E ratio of 16.4, the company has demonstrated solid financial performance. The firm observed that Leidos management expressed increased confidence in second-half revenue visibility and the funding environment compared to the previous quarter.
UBS highlighted that Leidos is seeing customers become more willing to make procurement decisions, with cancellations and de-scoping remaining at just a 1% drag on performance. The company also has increasing visibility into Veterans Benefits Administration (VBA) performance as the new administration focuses on reducing the claims backlog.
The Defense Systems segment gained momentum during the quarter and could see "meaningful upside potential" from the procurement budget and reconciliation, according to UBS. The firm indicated that Leidos may have moved past the most challenging period for efficiency headwinds.
Despite the positive developments, UBS maintained its Neutral stance, citing concerns about three consecutive sequential declines in funded backlog and questions about medium-term VBA market share and margin sustainability. The firm also noted that Leidos’ 2025 guidance, which implies just 1% year-over-year revenue growth and more than 200 basis points of sequential margin decline in the second half, "still seems conservative." For deeper insights into Leidos Holdings’ valuation and growth prospects, investors can access comprehensive analysis and 12 additional ProTips through InvestingPro’s detailed research reports.
In other recent news, Leidos Holdings reported strong financial results for the second quarter of 2025, exceeding market expectations. The company achieved an earnings per share of $3.21, surpassing the projected $2.64 by 21.59%. Revenue was reported at $4.25 billion, slightly above the anticipated $4.24 billion. Following these robust earnings, Stifel raised its price target for Leidos to $204 from $178 while maintaining a Buy rating, citing the company’s strong quarterly performance. Additionally, Leidos increased its fiscal year 2025 guidance in light of the positive results. In another development, Leidos announced a strategic partnership with Second Front Systems to enhance the delivery of software across federal agencies. Under this agreement, Leidos will manage the Game Warden platform, which is designed to expedite the deployment of secure software. These developments reflect significant recent activities for Leidos Holdings.
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