Leidos stock target cut to $155 by Jefferies, retains hold rating

On Wednesday, Jefferies analyst Sheila Kahyaoglu adjusted the price target on Leidos Holdings (NYSE:LDOS) stock, bringing it down to $155 from the previous $160 while maintaining a Hold rating on the shares. According to InvestingPro data, analyst targets for LDOS range from $148 to $220, with the stock currently trading below its Fair Value. The revision follows the company’s disclosure of its financial results for the year 2024. Leidos reported a robust performance with an 8% increase in organic revenue growth and a notable 29% rise in EBITDA, resulting in margins expanding to 12.9% from 10.8% in the year 2023.

Despite the solid financial outcomes, Leidos shares have experienced a 32% decline since the news related to DOGE, a cryptocurrency, was released. The market’s reaction may be attributed to the company’s conservative organic growth guidance for 2025, which is set between 1-4%, with EBITDA expected to remain flat. The company maintains a strong financial position with a healthy Altman Z-Score of 5.39 and operates with a moderate debt-to-equity ratio of 1.11. The company has shown an area of improvement in its free cash flow (FCF), achieving a 90% conversion rate in 2024 and anticipating an 87% rate in 2025. Want deeper insights? InvestingPro subscribers have access to over 30 additional financial metrics and exclusive analysis.

The IT Services sector, where Leidos operates, is considered attractive. However, as Kahyaoglu notes, the recent upgrade of CACI, another firm in the sector, suggests that there appears to be no valuation support for these companies at the moment. This observation comes despite the positive aspects of the sector and the individual companies within it.

Leidos Holdings, a leader in providing scientific, engineering, systems integration, and technical services, has seen its stock price adjust in response to the company’s financial guidance and broader market sentiment. With a consistent track record of dividend payments for 14 consecutive years and a current dividend yield of 1.16%, the company demonstrates strong shareholder commitment. The company’s performance, supported by an overall "GOOD" Financial Health Score from InvestingPro, and analyst expectations set the stage for investors to monitor the stock as it navigates through the challenges and opportunities presented in the current financial year.

In other recent news, Leidos Holdings, Inc. reported a robust fourth-quarter performance, with earnings and revenue surpassing analyst expectations. The company announced Q4 adjusted earnings per share of $2.37, exceeding the analyst estimate of $2.26. Revenue for the quarter was $4.37 billion, outpacing the consensus estimate of $4.13 billion.

These recent developments show a 10% increase in revenue year over year. The company attributes its strong performance to high demand across all customer segments, particularly in managed health services. Net income for the quarter rose 23% year over year to $282 million, with net income margin improving by 70 basis points to 6.5%.

Leidos has provided an optimistic outlook for fiscal year 2025, expecting an EPS in the range of $10.35 to $10.75, and revenue between $16.9 billion and $17.3 billion. The company also reported strong bookings for the quarter, with net bookings totaling $7.6 billion, contributing to a year-end backlog of $43.6 billion. Lastly, Leidos announced a quarterly cash dividend of $0.40 per share.

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