Core Viewpoint - The comparison between Leonardo DRS, Inc. and Heico Corporation indicates that DRS presents a better value opportunity for investors based on various valuation metrics [1][6]. Valuation Metrics - Both Leonardo DRS, Inc. and Heico Corporation currently hold a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions [3]. - DRS has a forward P/E ratio of 33.85, while HEI has a higher forward P/E of 57.12, suggesting DRS is more attractively priced [5]. - The PEG ratio for DRS is 2.32, compared to HEI's PEG ratio of 3.35, indicating DRS may offer better value relative to its expected earnings growth [5]. - DRS has a P/B ratio of 3.75, significantly lower than HEI's P/B ratio of 9.15, further supporting DRS's position as the superior value option [6]. - DRS's Value grade is B, while HEI's Value grade is D, highlighting the relative undervaluation of DRS [6].

Core Viewpoint - Leonardo DRS, Inc. has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive trend in earnings estimates which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in a company's earnings picture, which is crucial for predicting near-term stock price movements [2][4]. - An increase in earnings estimates typically leads to higher fair value calculations by institutional investors, resulting in stock price movements [4]. Company Performance Indicators - The upgrade for Leonardo DRS, Inc. suggests an improvement in the company's underlying business, which should encourage investors to drive the stock price higher [5]. - The Zacks Consensus Estimate indicates that Leonardo DRS, Inc. is expected to earn $1.07 per share for the fiscal year ending December 2025, reflecting a year-over-year increase of 15.1% [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks which have averaged a +25% annual return since 1988 [7]. - The upgrade to Zacks Rank 2 places Leonardo DRS, Inc. in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Company Overview - Leonardo DRS, Inc. (DRS) shares increased by 9% to close at $34.26, with trading volume significantly higher than usual, contrasting with a 0.5% loss over the past four weeks [1][2] - The recent rise in DRS' share price is linked to the U.S. President's announcement of a substantial increase in defense spending, with approximately $1 trillion allocated to defense in the upcoming fiscal 2026 budget [2] Earnings Expectations - DRS is projected to report quarterly earnings of $0.17 per share, reflecting a year-over-year increase of 21.4%, with revenues expected to reach $744.53 million, an 8.2% increase from the previous year [3] - The consensus EPS estimate for DRS has remained stable over the last 30 days, indicating that stock price movements may not sustain without changes in earnings estimate revisions [4] Industry Context - DRS operates within the Zacks Aerospace - Defense Equipment industry, where another company, Teledyne Technologies (TDY), saw a 7.6% increase in its stock price, closing at $468.69, despite a -10.8% return over the past month [4] - Teledyne's consensus EPS estimate has decreased by 1.8% over the past month to $4.92, which still represents an 8.1% increase compared to the previous year [5]

Core Viewpoint - Leonardo DRS, Inc. has received a Zacks Rank 2 (Buy) upgrade, indicating a positive outlook on its earnings potential, which is expected to positively influence its stock price [1][3]. Earnings Estimates and Revisions - The Zacks Consensus Estimate for Leonardo DRS, Inc. for the fiscal year ending December 2025 is projected at $1.07 per share, reflecting a 15.1% increase from the previous year's reported figure [8]. - Over the past three months, analysts have raised their earnings estimates for Leonardo DRS, with a 0.2% increase in the Zacks Consensus Estimate [8]. Impact of Institutional Investors - Changes in earnings estimates are strongly correlated with stock price movements, largely due to institutional investors who adjust their valuations based on these estimates [4]. - An increase in earnings estimates typically leads to higher fair value calculations for stocks, prompting institutional buying or selling actions that affect stock prices [4]. Zacks Rating System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade of Leonardo DRS to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating strong potential for market-beating returns in the near term [10].

Revenue Sources - The U.S. government accounted for 79% of total revenues in 2024, with the Department of Defense (DoD) representing 37% of total revenues[33]. - Approximately 63% of revenue in 2024 was derived from subcontractor positions, indicating a reliance on partnerships for contract fulfillment[36]. - The company generated $2.710 billion from firm-fixed price contracts in 2024, an increase from $2.373 billion in 2023[38]. - The company’s total revenues for 2024 were significantly supported by long-term programs and incumbent supplier relationships[37]. Backlog and Contracts - Total backlog increased to $8.509 billion in 2024, up from $7.751 billion in 2023, with funded backlog at $4.177 billion and unfunded backlog at $4.332 billion[42]. - The DoD's fiscal year 2025 budget request includes $850 billion for national defense programs, remaining largely flat compared to prior year levels[32]. - The company has a diverse business mix, with no single contract representing more than 10% of revenues for 2024[37]. Research and Development - Company-funded R&D expenses rose to $92 million in 2024, compared to $82 million in 2023 and $58 million in 2022[46]. - Leonardo S.p.A., the company's indirect majority stockholder, reported preliminary consolidated revenues of €17.8 billion and invested €2.5 billion in R&D in 2024[69]. Workforce and Employee Relations - The workforce included approximately 7,000 employees as of December 31, 2024, with 7% represented by labor unions[49]. - The company maintains a strong commitment to employee development and community support, emphasizing ethical business practices and safety in the workplace[55]. Financial Performance and Risks - The company generated a significant portion of its revenue, profit, and cash flows in the fourth quarter of its fiscal year, influenced by the U.S. federal government's budget cycle[60]. - The company reported an outstanding balance of $203 million under its 2022 Term Loan A, with a potential annual interest expense fluctuation of approximately $1 million for a 0.5% change in interest rates[399]. - The company has limited foreign currency exposure, primarily with receivables of $27 million in Canadian dollars, where a 10% fluctuation in exchange rates would not materially impact financial statements[400]. - The company experienced inflationary pressures affecting supply chain costs, particularly in micro-electronics and commodities, which could negatively impact future financial results[401]. - The company is subject to various procurement regulations and legal requirements, which could increase costs and risks, potentially affecting profitability[62]. Mergers and Acquisitions - The company completed the merger with RADA Electronic Industries Ltd. on November 28, 2022, resulting in RADA becoming a wholly-owned subsidiary and providing a 10% interest in RadSee Technologies Ltd.[57]. - The divestiture of the Global Enterprise Solutions business to SES Government Solutions, Inc. was completed on August 1, 2022, generating net cash proceeds of $427 million after adjustments[58]. - The company divested its equity investment in Advanced Acoustic Concepts LLC to Thales Defense & Security, Inc., resulting in proceeds of $56 million[59].

Group 1 - Aerospace and defense stocks are experiencing a sell-off due to potential reductions in defense budgets, impacting companies like Leonardo DRS, which has seen a 22% decline in stock value since November [1] - The Aerospace Forum aims to identify investment opportunities within the aerospace, defense, and airline sectors, leveraging data analytics for informed analysis [1] - The analyst behind the report has a background in aerospace engineering, providing context to industry developments and their potential effects on investment strategies [1] Group 2 - The article emphasizes that past performance does not guarantee future results, and no specific investment recommendations are provided [2] - It is noted that the analysts contributing to the platform may not be licensed or certified by any regulatory body, indicating a diverse range of perspectives [2]

Financial Data and Key Metrics Changes - In Q4 2024, revenue was $981 million, a 6% year-over-year increase, while full-year revenue reached $3.2 billion, representing a 14% organic growth over 2023 [40][41] - Adjusted EBITDA for Q4 was $148 million, up 13% year-over-year, and for the full year, it was $400 million, reflecting a 23% increase [42][43] - Diluted EPS and adjusted diluted EPS increased by 18% and 23% year-over-year in Q4, respectively, and for the full year, they rose by 25% and 27% [45][46] - Free cash flow for Q4 was robust at $416 million, leading to a total of $190 million for the full year [46][47] Business Line Data and Key Metrics Changes - Advanced Sensing and Computing segment revenue grew by 9% in Q4 and 16% for the full year, while Integrated Mission Systems segment revenue decreased slightly by 1% in Q4 but increased by 11% for the full year [41][44] - Adjusted EBITDA for the Advanced Sensing and Computing segment increased by 9% in Q4 and 22% for the full year, while the Integrated Mission Systems segment saw a 24% increase in Q4 and 27% for the full year [44] Market Data and Key Metrics Changes - International revenue rose to 13% in 2024, marking the fourth consecutive year of increased international business [30] - The company secured over $4 billion in contract awards throughout the year, resulting in a 1.3% book-to-bill ratio for both Q4 and the year [10][11] Company Strategy and Development Direction - The company plans to increase investments in R&D and capital expenditures by approximately 25% year-over-year, focusing on advanced sensing modalities, directed energy capabilities, and AI applications [12][51] - The company maintains a strong focus on execution excellence and aims to drive innovation and capability to meet customer needs while generating value for shareholders [19][38] Management's Comments on Operating Environment and Future Outlook - The management highlighted an elevated global threat environment, which is expected to drive continued defense investment from the US and allied nations [13][14] - The company anticipates 2025 to be another strong year, with revenue guidance set between $3.425 billion and $3.525 billion, implying 6% to 9% organic growth [48][49] Other Important Information - The company announced a cash dividend of $0.09 per share and a share buyback program totaling $75 million over the next two years [35][36] - The new facility in Charleston, South Carolina, is expected to enhance capabilities in steam turbine systems and support the Columbia class program [26][27] Q&A Session Summary Question: Impact of Doge effort on the company - Management indicated that the Doge effort has not yet reached the Department of Defense and remains focused on the new administration's strategic priorities [60] Question: Clarification on one-off items in Q4 - The CFO explained that the adjustments were primarily due to currency shifts affecting balance sheet items [63] Question: Margin targets for 2026 and other contributing areas - Management noted that smaller sensing and force protection programs transitioning from development to production phases would contribute to margin improvements alongside the Columbia program [68][69] Question: Status of KDDX and DDGX programs - Management confirmed ongoing engagement with the Korean customer for KDDX and noted growing interest in electric propulsion for DDGX [79][80] Question: Concerns about raw material supply - The CFO stated that while germanium remains a focus, overall supply chain stability has improved, with no significant concerns outside of germanium [85][86] Question: Implications of potential budget cuts - Management expressed confidence in their balanced exposure across services and highlighted growth areas in counter UAS and AI-supported computing [92][94] Question: Foreign military sales impact due to geopolitical tensions - Management noted a slight increase in revenue from Ukraine but anticipated a tapering off as negotiations progress, while European demand for American systems may rise [111][112]

Financial Performance - Full Year 2024 - The company achieved full year 2024 organic revenue growth of 14%[7], reaching $3.234 billion[12] - Adjusted EBITDA grew by 23% to $400 million[7, 12], with a margin expansion of 90 bps to 12.4%[7, 12] - Adjusted Net Earnings increased by 28% to $249 million[12] - Adjusted Diluted EPS increased by 27% to $0.93[12] Financial Performance - Q4 2024 - Q4 2024 revenue increased by 6% to $981 million[9] - Adjusted EBITDA grew by 13% to $148 million[9], with a margin expansion of 100 bps to 15.1%[9] - Adjusted Net Earnings increased by 22% to $101 million[9] - Adjusted Diluted EPS increased by 23% to $0.38[9] Bookings and Backlog - Total backlog reached a new company record of $8.5 billion[7, 9] - Bookings for Q4 2024 were $1.3 billion, and $4.1 billion for the full year, representing a 1.3x book-to-bill ratio for both periods[7] 2025 Guidance - The company projects 2025 organic revenue growth of 6% to 9%, resulting in revenue between $3.425 billion and $3.525 billion[7, 14] - Adjusted EBITDA growth is expected to exceed topline growth at 9% to 14%, leading to an Adjusted EBITDA between $435 million and $455 million[7, 14] - Adjusted Diluted EPS is projected to be between $1.02 and $1.08, representing a 10% to 16% increase[14]

Core Insights - Leonardo DRS, Inc. reported revenue of $981 million for the quarter ended December 2024, reflecting a year-over-year increase of 5.9% [1] - The earnings per share (EPS) for the quarter was $0.38, up from $0.31 in the same quarter last year, indicating a positive trend in profitability [1] - The reported revenue exceeded the Zacks Consensus Estimate of $942.62 million by 4.07%, and the EPS also surpassed the consensus estimate of $0.36 by 5.56% [1] Financial Performance Metrics - Revenue from the IMS segment was $326 million, slightly below the average estimate of $329.20 million from three analysts [4] - Revenue from the ASC segment was $660 million, exceeding the average estimate of $619.13 million from three analysts [4] - Adjusted EBITDA for the IMS segment was $46 million, surpassing the estimated $44.69 million, while the ASC segment's adjusted EBITDA was $102 million, above the average estimate of $96.86 million [4] Stock Performance - Over the past month, shares of Leonardo DRS, Inc. have declined by 20.2%, contrasting with a 2.6% increase in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

分组1 - Leonardo DRS, Inc. reported quarterly earnings of $0.38 per share, exceeding the Zacks Consensus Estimate of $0.36 per share, and up from $0.31 per share a year ago, representing an earnings surprise of 5.56% [1] - The company achieved revenues of $981 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 4.07%, compared to $926 million in the same quarter last year [2] - Over the last four quarters, Leonardo DRS has consistently surpassed consensus EPS and revenue estimates [2] 分组2 - The stock has underperformed, losing about 8.6% since the beginning of the year, while the S&P 500 has gained 4.5% [3] - The current consensus EPS estimate for the upcoming quarter is $0.18 on revenues of $756.87 million, and for the current fiscal year, it is $1.07 on revenues of $3.43 billion [7] - The Aerospace - Defense Equipment industry is currently ranked in the bottom 49% of over 250 Zacks industries, which may impact the stock's performance [8]