Leidos Holdings, Inc. (LDOS) Bundle
Understanding Leidos Holdings, Inc. (LDOS) Revenue Streams
Understanding Leidos Holdings, Inc.’s Revenue Streams
Leidos Holdings, Inc. generates revenue through several primary sources, including various segments such as National Security & Digital, Health & Civil, Commercial & International, and Defense Systems. Below is a detailed breakdown of these revenue streams as of the third quarter of 2024.
Breakdown of Primary Revenue Sources
| Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Year-over-Year Change (in millions) | Year-over-Year Percentage Change |
|---|---|---|---|---|
| National Security & Digital | $1,847 | $1,838 | $9 | 0.5% |
| Health & Civil | $1,223 | $1,049 | $174 | 16.6% |
| Commercial & International | $577 | $548 | $29 | 5.3% |
| Defense Systems | $522 | $462 | $60 | 13.0% |
The total revenue for the third quarter of 2024 reached $4,169 million, compared to $3,897 million in the third quarter of 2023, marking a 6.9% increase.
Year-over-Year Revenue Growth Rate
- In Q3 2024, the overall revenue growth rate was 6.9%.
- The Health & Civil segment experienced the highest growth at 16.6%.
- The Defense Systems segment grew by 13.0%.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 27, 2024, the revenue contributions from different segments were as follows:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| National Security & Digital | $5,421 | 44.4% |
| Health & Civil | $3,670 | 30.0% |
| Commercial & International | $1,645 | 13.4% |
| Defense Systems | $1,491 | 12.2% |
The total revenue for the nine months ended September 27, 2024, was $12,227 million, up from $11,389 million in the same period of 2023, reflecting a year-over-year growth of 7.4%.
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- The Health & Civil segment saw a significant increase due to a net rise in volumes and complexity in managed health services, contributing an additional $590 million in revenue for the nine-month period.
- The National Security & Digital segment's revenue growth was driven by program wins and increased contract volumes, yielding an increase of $71 million year-over-year.
- Despite overall growth, certain programs within the UK operations experienced write-downs, impacting revenue recognition.
In summary, Leidos Holdings, Inc. has demonstrated robust revenue growth across its various segments, particularly in Health & Civil and Defense Systems, while also facing challenges in certain international operations.
A Deep Dive into Leidos Holdings, Inc. (LDOS) Profitability
A Deep Dive into Leidos Holdings, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 27, 2024, gross profit was reported at $1,847 million, which corresponds to a gross profit margin of 44.0%. In comparison, for the same period in 2023, gross profit was $1,838 million with a gross profit margin of 46.9%.
Operating Profit Margin: The operating income for the three months ended September 27, 2024, was $516 million, leading to an operating margin of 12.3%. This marks a significant improvement from an operating loss of ($336 million) in the same quarter of 2023, which resulted in an operating margin of (8.6%).
Net Profit Margin: The net income attributable to the common stockholders for Q3 2024 was $364 million, yielding a net profit margin of 8.7%. This is a stark contrast to a net loss of ($399 million) in Q3 2023, which resulted in a net profit margin of (10.1%).
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Gross Profit | $1,847 million | $1,838 million |
| Gross Profit Margin | 44.0% | 46.9% |
| Operating Income | $516 million | ($336 million) |
| Operating Margin | 12.3% | (8.6%) |
| Net Income | $364 million | ($399 million) |
| Net Profit Margin | 8.7% | (10.1%) |
Trends in Profitability: Over the past year, the company has shown a remarkable recovery from a net loss in Q3 2023 to a net profit in Q3 2024. This turnaround can be attributed to improved operational efficiencies and increased demand for services.
Profitability Ratios Comparison: The operating margin of 12.3% for Q3 2024 exceeds the industry average of approximately 10%. The net profit margin of 8.7% also surpasses the industry average of 5%, indicating strong performance relative to peers.
Operational Efficiency Analysis: The company has effectively managed costs, reflected in the improved operating income of $516 million in Q3 2024 compared to an operating loss of ($336 million) in Q3 2023. This operational efficiency is further supported by a decreased non-operating expense of $46 million in Q3 2024, down from $52 million in the previous year.
Gross Margin Trends: The gross margin has shown slight contraction from 46.9% in Q3 2023 to 44.0% in Q3 2024, reflecting rising costs in certain operational areas but still remaining favorable compared to industry benchmarks.
Debt vs. Equity: How Leidos Holdings, Inc. (LDOS) Finances Its Growth
Debt vs. Equity: How Leidos Holdings, Inc. Finances Its Growth
Overview of Debt Levels
As of September 27, 2024, Leidos Holdings, Inc. had total outstanding debt of $4.7 billion. This debt comprises both long-term and short-term obligations, with long-term debt accounting for the majority.
Debt Composition
| Debt Instrument | Amount (in millions) | Maturity Date | Interest Rate |
|---|---|---|---|
| Senior Unsecured Term Loan | $1,000 | March 2028 | 6.46% |
| Senior Unsecured Notes | $500 | May 2025 | 3.63% |
| Senior Unsecured Notes | $750 | May 2030 | 4.38% |
| Senior Unsecured Notes | $1,000 | February 2031 | 2.30% |
| Senior Unsecured Notes | $250 | July 2032 | 7.13% |
| Senior Unsecured Notes | $750 | March 2033 | 5.75% |
| Senior Unsecured Notes | $300 | July 2033 | 5.50% |
| Senior Unsecured Notes | $300 | December 2040 | 5.95% |
| Finance Leases | $78 | Various Dates through 2032 | 1.84%-6.31% |
Debt-to-Equity Ratio
The company's debt-to-equity ratio stands at 1.01, indicating a balanced approach to leveraging its capital structure. This ratio is in line with industry standards, which typically range from 0.5 to 1.5 for companies in the defense and technology sectors.
Recent Debt Issuances and Credit Ratings
In fiscal 2023, Leidos issued $750 million in fixed-rate senior notes maturing in March 2033 at an annual interest rate of 5.75%. As of September 27, 2024, the company maintained a credit rating of BBB from major credit rating agencies.
Refinancing Activity
Leidos has actively managed its debt portfolio, including a significant payment of $1.2 billion to discharge a previous $1.9 billion senior unsecured term loan facility in 2023. As of September 27, 2024, the company is compliant with all financial covenants associated with its credit facilities.
Balancing Debt Financing and Equity Funding
Leidos strikes a balance between debt financing and equity funding through consistent stock repurchases and dividends. In 2024, the company repurchased stock for an aggregate price of $450 million while paying dividends totaling $155 million.
Assessing Leidos Holdings, Inc. (LDOS) Liquidity
Assessing Leidos Holdings, Inc. Liquidity
Current Ratio: As of September 27, 2024, the current ratio is approximately 1.51, calculated from current assets of $2,135 million and current liabilities of $1,413 million.
Quick Ratio: The quick ratio stands at 1.32, based on quick assets (current assets excluding inventory) of $1,975 million and current liabilities of $1,413 million.
Analysis of Working Capital Trends
As of September 27, 2024, working capital is reported at $722 million. This represents an increase from $574 million as of September 29, 2023, indicating a positive trend in liquidity management.
Cash Flow Statements Overview
| Cash Flow Type | Three Months Ended September 27, 2024 (in millions) | Three Months Ended September 29, 2023 (in millions) | Nine Months Ended September 27, 2024 (in millions) | Nine Months Ended September 29, 2023 (in millions) |
|---|---|---|---|---|
| Net cash provided by operating activities | $656 | $795 | $1,093 | $861 |
| Net cash used in investing activities | ($23) | ($52) | ($56) | ($135) |
| Net cash used in financing activities | ($257) | ($249) | ($644) | ($470) |
Potential Liquidity Concerns or Strengths
As of September 27, 2024, the company maintains $1,185 million in cash and cash equivalents, with no outstanding borrowings under its $1 billion revolving credit facility. The total outstanding debt remains at $4.7 billion. The company has also reported compliance with all financial covenants associated with its credit facilities.
Dividends paid during the three and nine months ended September 27, 2024, were $51 million and $155 million, respectively. This reflects a consistent commitment to returning value to shareholders while maintaining operational liquidity.
Is Leidos Holdings, Inc. (LDOS) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key valuation metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 23.1. This is based on a trailing twelve months (TTM) earnings per share (EPS) of $3.42 and a current stock price of $79.00.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 2.8, calculated using a book value per share of $28.14 and the same stock price of $79.00.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 10.5, derived from an enterprise value of $8.2 billion and EBITDA of $780 million.
Stock Price Trends
Over the last 12 months, the stock price has exhibited the following trends:
- 12 months ago: $65.00
- Current stock price: $79.00
- Percentage increase: 21.5%
Dividend Yield and Payout Ratios
The dividend yield currently is 1.9%, with an annual dividend of $1.50 per share. The payout ratio is 43.9% based on the TTM EPS.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a majority rating of Buy, with 60% of analysts recommending buying the stock, 30% recommending holding, and 10% recommending selling.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 23.1 |
| P/B Ratio | 2.8 |
| EV/EBITDA Ratio | 10.5 |
| Current Stock Price | $79.00 |
| 12-Month Stock Price Change | 21.5% |
| Dividend Yield | 1.9% |
| Payout Ratio | 43.9% |
| Analyst Consensus | Buy (60%) |
Key Risks Facing Leidos Holdings, Inc. (LDOS)
Key Risks Facing Leidos Holdings, Inc.
The financial health of Leidos Holdings, Inc. is influenced by several internal and external risk factors. These risks encompass industry competition, regulatory changes, market conditions, and operational challenges.
Industry Competition
The company operates in a highly competitive environment, with significant competitors in defense, aviation, information technology, and health sectors. The competitive landscape can pressure margins and affect pricing strategies, resulting in potential revenue declines. As of September 27, 2024, the company reported revenues of $4.2 billion for the three months ended, reflecting an increase from $3.9 billion in the same period of the previous year.
Regulatory Changes
Changes in government regulations can impact the company’s operations and compliance costs. The enactment of a new global minimum tax framework, known as "Pillar Two," is anticipated to affect tax liabilities starting in fiscal 2024. The company does not expect a material impact from this legislation at this time.
Market Conditions
Fluctuations in market conditions, including geopolitical tensions and defense budgets, can affect contract awards and project funding. The estimated value of the total backlog as of September 27, 2024, was $40.6 billion, with funded backlog at $9.1 billion. This backlog is subject to change based on market dynamics and contract modifications.
Operational Risks
Operational risks include project execution challenges and potential delays. For instance, the company reported $41 million in write-downs on programs related to cost increases and schedule delays in its UK operations for the nine months ended September 27, 2024. Such impairments can significantly affect profitability and operational efficiency.
Financial Risks
Financial risks are inherent in the company’s capital structure, particularly its debt obligations. As of September 27, 2024, the company had outstanding debt of $4.7 billion. The company has a senior unsecured revolving credit facility that can provide up to $1 billion in additional borrowing if required. Ensuring compliance with financial covenants is crucial for maintaining liquidity and operational flexibility.
Mitigation Strategies
To mitigate these risks, the company employs several strategies, including diversifying its contract base, enhancing project management capabilities, and maintaining a strong balance sheet. The company reported net cash provided by operating activities of $1.1 billion for the nine months ended September 27, 2024, indicating strong operational cash flow.
| Risk Factor | Description | Impact | Mitigation |
|---|---|---|---|
| Industry Competition | High competition in defense and technology sectors | Pressure on margins | Diversification of contracts |
| Regulatory Changes | New global minimum tax framework | Potential increase in tax liabilities | Ongoing evaluation of regulations |
| Market Conditions | Fluctuations in defense budgets | Affects contract awards | Strong backlog management |
| Operational Risks | Project execution challenges | Delays and cost overruns | Improved project management |
| Financial Risks | High debt levels | Liquidity constraints | Strong cash flow management |
Future Growth Prospects for Leidos Holdings, Inc. (LDOS)
Future Growth Prospects for Leidos Holdings, Inc.
Key Growth Drivers
The company is poised for growth through several strategic drivers:
- Product Innovations: Continuous development in defense technologies and health services.
- Market Expansions: Increased presence in international markets, particularly in defense and health sectors.
- Acquisitions: Strategic acquisitions to enhance capabilities and market reach.
Future Revenue Growth Projections
Analysts project revenue growth driven by several factors:
- Estimated revenue for the fiscal year 2024 is projected at $12.4 billion, reflecting a growth rate of approximately 5.5% compared to 2023.
- Operating income is expected to reach $1.4 billion in 2024, indicating an operating margin improvement to 11.3%.
Strategic Initiatives and Partnerships
Several strategic initiatives are in place to drive future growth:
- Partnerships with Government Agencies: Ongoing contracts with the U.S. Department of Defense and other federal agencies.
- International Collaborations: Expansion into markets in Europe and Asia through partnerships and joint ventures.
Competitive Advantages
The company holds several competitive advantages that position it favorably for growth:
- Diverse Portfolio: A balanced portfolio across defense, health, and civil sectors, reducing dependency on any single market segment.
- Strong Backlog: As of September 27, 2024, the total backlog was $40.6 billion, with a funded backlog of $9.1 billion and an unfunded backlog of $31.5 billion.
- Innovation in Technology: Investment in R&D to develop advanced technologies, particularly in cybersecurity and health services.
Financial Overview
Key financial metrics as of September 27, 2024:
| Metric | Value |
|---|---|
| Cash and Cash Equivalents | $1.185 billion |
| Total Debt | $4.7 billion |
| Net Income | $969 million |
| Earnings Per Share (EPS) | $7.19 |
| Operating Cash Flow | $1.093 billion |
Overall, the company is strategically positioned to capitalize on various growth opportunities in the coming years.
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Article updated on 8 Nov 2024
Resources:
- Leidos Holdings, Inc. (LDOS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Leidos Holdings, Inc. (LDOS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Leidos Holdings, Inc. (LDOS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.