UBS reiterates Leidos stock rating at Neutral with $209 price target

Investing.com - UBS maintained its Neutral rating on Leidos Holdings (NYSE:LDOS) with a price target of $209.00, according to a research note released Monday. The stock currently trades at $188.99, with analyst targets ranging from $171 to $215. According to InvestingPro analysis, the company maintains good financial health with strong profitability metrics.

The Veterans Benefits Administration (VBA) claims backlog has decreased 33% year-to-date, though Leidos Health & Civil revenue has remained relatively flat over the past year, UBS noted in its analysis.

The backlog reduction appears to stem from a nearly 100% decrease in post-exam claims, suggesting that increased examinations are necessary for further backlog reduction—a process that appears to be underway, according to the research firm.

Third-quarter VBA obligations have increased significantly, with implied exams trending upward, which UBS believes could drive upside to Leidos’ VBA revenue and margins in coming quarters.

The research note also highlighted that non-VBA Health obligations declined in the third quarter, potentially offsetting some upside, though an improved VBA mix could still provide meaningful margin benefits.

In other recent news, Leidos has been awarded a $105.5 million contract by the U.S. Department of Defense to support operational readiness research for the Naval Health Research Center. This contract will involve comprehensive investigative studies and experimental protocols. Additionally, Leidos and Sky Solutions have formed a joint venture named Purple Sky, LLC, to enhance digital services for federal health agencies, focusing on technology upgrades and improved data access. In collaboration with VML, Leidos has also launched an AI platform called Imperium to bolster U.S. information operations, which reportedly reduces planning tasks significantly.

Moreover, Leidos has introduced the Sea Dagger craft for the Royal Navy, designed for commando operations with impressive speed and modular capabilities. UBS has maintained a Neutral rating on Leidos stock, citing a significant decline in the company’s Health & Civil backlog in the second quarter. These developments highlight Leidos’ ongoing efforts in defense and health technology sectors, as well as its strategic partnerships to advance digital transformation and operational readiness.

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