Leidos raises earnings guidance after quarterly profit grows
Leidos reported higher quarterly revenue and net income, with demand for defense technology, air traffic management and intelligence support contributing to growth. Its adjusted earnings exceeded the Zacks consensus estimate, while revenue fell short. A lower effective tax rate also helped profit. Management improved its annual guidance for a third consecutive quarter, while reporting cash generation and shareholder distributions for the completed period.
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Defense and air traffic demand support revenue
Leidos, a provider of defense technology and government services, reported 4.630 billion dollars in revenue for the fiscal third quarter ended 2 October. Revenue had been 4.469 billion dollars a year earlier, putting growth at 4 per cent. Management cited demand for defense technology, air traffic management and intelligence support, together with the ENTRUST Solutions acquisition. Declines in certain managed-health and federal civilian information technology programs offset part of the increase.[1]
Lower taxes contribute to higher earnings
Net income increased from 369 million dollars to 413 million dollars, and diluted earnings per share rose from 2.82 dollars to 3.28 dollars. The net-income margin widened from 8.3 per cent to 8.9 per cent. A lower effective tax rate helped both reported and adjusted earnings; the company linked part of that benefit to a larger federal research tax credit.[1]
Adjusted diluted earnings reached 3.62 dollars per share, compared with 3.05 dollars in the preceding year’s quarter. Zacks placed the adjusted earnings result above its consensus estimate and revenue below it. Management improved its annual outlook for the third successive quarter. Adjusted earnings before interest, taxes, depreciation and amortization increased from 616 million dollars to 644 million dollars, with a margin of 13.9 per cent.[1], [2]
Cash generation and contract backlog
Operating activities generated 523 million dollars in cash. After property, equipment and software payments, free cash flow was 476 million dollars. Shareholder distributions totaled 556 million dollars, comprising 504 million dollars of share repurchases and 52 million dollars of dividends. At the end of the quarter Leidos held 630 million dollars of cash and equivalents against 6.0 billion dollars in debt.[1]
The quarter brought 5.5 billion dollars of new bookings. Total backlog reached 49.6 billion dollars, including 11.1 billion dollars with funding in place. These are the company’s outstanding contracted business figures, reported separately from revenue recognized during the completed quarter. The funded portion forms part of the overall backlog rather than an additional amount of sales.[1]
