Core Viewpoint - Leonardo DRS, Inc. is positioned as a strong investment opportunity within the Zacks Aerospace Defense Equipment industry due to its robust backlog, increasing earnings estimates, and effective debt management [1] Growth Projections & Surprise History - The Zacks Consensus Estimate for DRS' 2025 earnings per share (EPS) has risen by 0.9% to $1.07 per share over the past 60 days [2] - Total revenue for DRS in 2025 is projected at $3.43 billion, reflecting a year-over-year growth of 7.4% [2] - The company's long-term earnings growth rate is estimated at 21.2%, with an average earnings surprise of 22.27% over the last four quarters [2] Debt Position - DRS has a total debt to capital ratio of 12.92%, significantly lower than the industry average of 54.03% [3] - The times interest earned (TIE) ratio for DRS at the end of Q3 2024 was 10.5, indicating strong capability to meet interest obligations [3] Liquidity - The current ratio for DRS at the end of Q3 2024 was 2.11, surpassing the industry average of 1.43, demonstrating the company's ability to cover short-term liabilities [4] Rising Backlog - DRS' total backlog as of September 30, 2024, increased by 75.1% to $8.26 billion compared to the same quarter last year, primarily driven by a multi-boat contract with the U.S. Navy for electric propulsion activities on the Columbia Class submarine program [5] Stock Price Performance - Over the past six months, DRS shares have increased by 27.2%, outperforming the industry's growth of 18.4% [6]

Company Performance - Leonardo DRS, Inc. has returned 72% year-to-date, significantly outperforming the average return of 2.3% for Aerospace companies [4] - The Zacks Consensus Estimate for DRS' full-year earnings has increased by 8.6% over the past three months, indicating improved analyst sentiment and a stronger earnings outlook [4] - Leonardo DRS, Inc. currently holds a Zacks Rank of 1 (Strong Buy), reflecting its favorable characteristics for outperforming the market [3] Industry Context - Leonardo DRS, Inc. is part of the Aerospace - Defense Equipment industry, which includes 23 companies and has gained approximately 32.6% year-to-date [6] - The Aerospace sector, which includes 46 individual stocks, currently holds a Zacks Sector Rank of 6, indicating its relative performance compared to other sectors [2] - Another notable performer in the Aerospace sector is Mercury Systems (MRCY), which has increased by 9.4% year-to-date and has a Zacks Rank of 2 (Buy) [5][6]

Company Overview - Leonardo DRS, Inc. currently holds a Momentum Style Score of B, indicating potential for strong performance in the momentum investing strategy [3] - The company has a Zacks Rank of 1 (Strong Buy), which is associated with a historical track record of outperforming the market [4] Price Performance - Over the past week, shares of DRS have increased by 19.11%, significantly outperforming the Zacks Aerospace - Defense Equipment industry, which rose by 4.86% during the same period [6] - In a longer time frame, DRS shares have gained 22.34% over the past quarter and 85.97% over the last year, while the S&P 500 has only increased by 9.45% and 33.9%, respectively [7] Trading Volume - The average 20-day trading volume for DRS is currently 719,897 shares, which serves as a useful baseline for assessing price movements [8] Earnings Outlook - In the past two months, four earnings estimates for DRS have been revised upwards, with no downward revisions, leading to an increase in the consensus estimate from $0.84 to $0.90 [10] - For the next fiscal year, four estimates have also moved upwards without any downward revisions, indicating positive sentiment regarding future earnings [10]

Core Viewpoint - Leonardo DRS, Inc. has experienced a significant increase in share prices, rising by 79.59% over the past year, raising questions about its future profitability and growth trajectory [1]. Group 1 - The company has shown a remarkable performance in the stock market, with a notable increase in share prices [1]. - The rise in share prices prompts inquiries regarding the sustainability of this growth and whether it will continue to be profitable [1].

Core Viewpoint - November is expected to be a strong month for stocks, driven by interest rate cuts and increased consumer spending, despite potential volatility from the upcoming presidential election. Investors are encouraged to focus on stocks with earnings acceleration [1]. Earnings Acceleration - Earnings acceleration refers to the incremental growth in a company's earnings per share (EPS), indicating a rise in quarter-over-quarter earnings growth rates within a specific timeframe [3]. - Stocks that exhibit earnings acceleration are often undervalued and can lead to significant price rallies once investors take notice [4]. Importance of Earnings Growth - A consistent increase in earnings growth percentage suggests a fundamentally sound company, while stagnant or declining growth can indicate potential price declines [5]. Screening Parameters - The screening process involves identifying stocks where the last two quarter-over-quarter EPS growth rates exceed previous periods, with projected growth rates also expected to be higher [6][7][8]. - Additional criteria include a current stock price of at least $5 and an average 20-day trading volume of 50,000 or more to ensure liquidity [8]. Selected Stocks - **Snap Inc. (SNAP)**: A mobile camera app with a Zacks Rank of 2 (Buy) and an expected earnings growth rate of 166.7% for the current year [9]. - **GeneDx Holdings Corp. (WGS)**: A healthcare pioneer in genome testing, currently holding a Zacks Rank of 1, with an expected earnings growth rate of 95.4% [10]. - **Leonardo DRS, Inc. (DRS)**: A defense product manufacturer with a Zacks Rank of 2 and an expected earnings growth rate of 21.9% for the current year [11].

Leonardo DRS, Inc. (DRS) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #1 (Strong Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.A company's changing earnings picture is at the core of the Zacks rating. The system tracks the Zacks Consensus Estimate -- the consensus measure of EPS estimates from the sell-side analysts covering the stock -- for the current and following years.S ...

Financial Data and Key Metrics Changes - The company reported a quarterly revenue growth of 16% year-over-year, with adjusted EBITDA increasing by 22% and margin expansion of 60 basis points in Q3 [9][20][21] - Adjusted diluted EPS rose by 20% year-over-year, reaching $0.24 per share, while net earnings were $57 million, up 21% [23][27] - The book-to-bill ratio for the quarter was 1.3, indicating strong demand and order intake [7][8] Business Line Data and Key Metrics Changes - Advanced Sensing and Computing (ASC) revenue increased by 24% year-over-year, driven by advanced infrared sensing and tactical radars [21] - Integrated Mission Systems (IMS) revenue grew modestly by 3%, supported by force protection programs [21][22] - ASC adjusted EBITDA rose by 33%, with a margin increase of 90 basis points, while IMS adjusted EBITDA increased by 6% with a margin expansion of 30 basis points [22] Market Data and Key Metrics Changes - The company noted a healthy customer demand across its differentiated portfolio, particularly in naval network computing, electric power and propulsion, force protection, and advanced infrared sensing technologies [8][11] - International markets are growing faster than the U.S. defense budget, with a doubling of international revenue from about 5% to 10% over the past few years [58] Company Strategy and Development Direction - The company is focused on innovation and agility, with ongoing efforts to integrate AI into its sensing solutions and expand its radar portfolio [16][17] - The strategic acquisition of RADA is being validated as demand for tactical radars increases due to the global threat environment [12][13] - The company is actively pursuing M&A opportunities in its core markets, with an uptick in actionable opportunities [40][62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the defense investment landscape, anticipating higher and prolonged U.S. and allied defense spending due to the global threat environment [10][11] - The company has increased its 2024 revenue guidance to a range of $3.15 billion to $3.20 billion, reflecting 11% to 13% year-over-year growth [25][26] - Preliminary guidance for 2025 projects revenue growth of 5% to 8%, with adjusted EBITDA margin around 13% [28] Other Important Information - The company is making steady progress on its new facility in Charleston, South Carolina, which is expected to enhance production efficiency [17][70] - Free cash flow conversion is targeted at approximately 80% of adjusted net earnings for the year [27] Q&A Session Summary Question: Changes in force protection demand - Management noted that force protection demand has ramped up due to changing U.S. strategies and increased threats, with no immediate need for more CapEx [31][32] Question: Supply chain status in naval shipyards - The focus is on in-sourcing for the Columbia-class program to improve efficiency, with no current need for outsourcing [33] Question: 2025 growth outlook - The 5% to 8% growth range considers the impact of continuing resolutions, with most revenue coming from backlog and program continuation [34][35] Question: Risks to the Columbia-class program - Management indicated no current risks to the schedule or financials from external issues, as contracts are insulated from variability [38] Question: M&A sourcing strategy - The company has a dedicated team reviewing opportunities, focusing on core mission areas and cultivating relationships for potential acquisitions [62][63]

Revenue Sources - For the nine months ended September 30, 2024, approximately 81% of the company's business was derived from the U.S. Department of Defense (DoD), with revenues from the U.S. Navy and U.S. Army accounting for 37% and 32% of total revenues, respectively[84]. - The company's revenue for the nine months ended September 30, 2024, consisted of 94% product-related revenue, with 83% derived from firm-fixed price contracts[109]. - The company’s revenues from U.S. government contracts represented 81% and 80% of total revenues for the nine months ended September 30, 2024, and 2023, respectively[100]. - International revenue accounted for approximately 13% of total revenue for the nine months ended September 30, 2024, up from 9% in the same period in 2023, due to increased defense spending in Eastern Europe[166]. Financial Performance - Total revenues for the three months ended September 30, 2024, increased by $109 million, or 15.5%, to $812 million compared to $703 million for the same period in 2023[119]. - Gross profit for the three months ended September 30, 2024, increased by $17 million, or 10.5%, to $179 million compared to $162 million for the same period in 2023[123]. - Operating earnings for the three months ended September 30, 2024, increased by $16 million, or 27.1%, to $75 million compared to $59 million for the same period in 2023[127]. - Net earnings for the three months ended September 30, 2024, increased by $10 million, or 21.3%, to $57 million compared to $47 million for the same period in 2023[133]. - Adjusted EBITDA for the three months ended September 30, 2024, was $100 million, compared to $82 million for the same period in 2023[140]. - Adjusted diluted EPS for the three months ended September 30, 2024, was $0.24, compared to $0.20 for the same period in 2023[140]. - Adjusted net earnings for the three months ended September 30, 2024, were $64 million, compared to $53 million for the same period in 2023[149]. - For the nine months ended September 30, 2024, adjusted EBITDA increased by $59 million, or 30.6%, to $252 million from $193 million for the same period in 2023[146]. Backlog and Bookings - Backlog increased by $3,545 million to $8,264 million as of September 30, 2024, from $4,719 million as of September 30, 2023[136]. - Bookings for the three months ended September 30, 2024, decreased to $1,051 million compared to $1,055 million for the same period in 2023, while bookings for the nine months ended September 30, 2024, increased to $2,807 million compared to $2,502 million for the same period in 2023[138]. - Total bookings for the three months ended September 30, 2024, decreased by 0.4% to $1,051 million compared to $1,055 million for the same period in 2023[171]. - ASC segment bookings decreased by 16.5% to $685 million for the three months ended September 30, 2024, due to accelerated awards in the previous year[176]. - IMS segment bookings increased by 55.7% to $366 million for the three months ended September 30, 2024, driven by new awards in electric power and propulsion programs[182]. Operational Efficiency - The company has institutionalized a continuous improvement process through its APEX program, aimed at enhancing efficiency and customer satisfaction[95]. - The company recognizes revenue based on performance obligations in contracts, with the majority derived from fixed-price contracts[157]. - The company’s operational performance is influenced by the integration of goods and services in contracts, which are often complex and require significant coordination[157]. Cash Flow and Liquidity - As of September 30, 2024, the company's cash balance was $198 million, a decrease from $467 million as of December 31, 2023[184]. - Net cash used in operating activities decreased by $138 million, from $310 million for the nine months ended September 30, 2023, to $172 million for the same period in 2024[186]. - Free cash flow usage decreased by $109 million to $(226) million for the nine months ended September 30, 2024, from $(335) million for the same period in 2023, primarily due to lower cash used to fund working capital[153]. - Net cash used in investing activities increased by $13 million for the nine months ended September 30, 2024, primarily due to higher capital expenditures for a naval expansion project in South Carolina[187]. - Net cash used in financing activities was $42 million for the nine months ended September 30, 2024, compared to net cash provided of $93 million for the same period in 2023[188]. - The company believes its existing cash and access to credit facilities will be sufficient to meet short and long-term liquidity needs, although future cash flow generation is uncertain[184]. Risks and Challenges - Approximately 5% of the company's workforce is located in Israel, which poses potential operational risks due to ongoing regional conflicts[99]. - U.S. government spending and federal budget uncertainty may impact the company's business and results of operations, particularly in defense and technology sectors[154]. - Inflationary pressures have impacted supply chain costs, particularly in microelectronics and commodities, which could negatively affect future financial results[195]. - The company is exposed to interest rate risk on variable-rate borrowings, with a 0.5% change in the weighted average interest rate potentially impacting annual interest expense by approximately $1 million[192]. - The company has limited foreign currency exposure, primarily with receivables of $29 million in Canadian dollars as of September 30, 2024[194]. Segment Performance - The company's Advanced Sensing and Computing segment focuses on enhancing sensor capabilities for various military applications, including precision targeting and surveillance[86]. - The company's Integrated Mission Systems segment integrates power conversion and control systems for military applications, contributing to its diverse product offerings[89]. - ASC segment revenue rose by 23.7% to $533 million for the three months ended September 30, 2024, driven by advanced sensing and force protection programs[173]. - IMS segment revenue increased by 2.9% to $285 million for the three months ended September 30, 2024, attributed to short-range air defense programs[178]. - ASC's adjusted EBITDA margin improved by 90 basis points to 12.0% for the three months ended September 30, 2024[174]. - IMS's adjusted EBITDA margin increased by 30 basis points to 12.6% for the three months ended September 30, 2024[180].

分组1 - Leonardo DRS, Inc. reported quarterly earnings of $0.24 per share, exceeding the Zacks Consensus Estimate of $0.20 per share, and showing an increase from $0.20 per share a year ago, resulting in an earnings surprise of 20% [1] - The company achieved revenues of $812 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 4.66%, and up from $703 million in the same quarter last year [2] - Leonardo DRS has consistently outperformed consensus EPS estimates over the last four quarters, achieving this four times [2] 分组2 - The stock has gained approximately 41.7% since the beginning of the year, compared to the S&P 500's gain of 22.3% [3] - The current consensus EPS estimate for the upcoming quarter is $0.34 on revenues of $931.47 million, and for the current fiscal year, it is $0.86 on revenues of $3.15 billion [7] - The Zacks Industry Rank for Aerospace - Defense Equipment is currently in the bottom 34% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

Leonardo DRS Announces Financial Results for Third Quarter 2024 • Revenue: $812 million, up 16% year-over-year • Net Earnings: $57 million, up 21% year-over-year • Adjusted EBITDA: $100 million, up 22% year-over-year • Diluted EPS: $0.21, up 17% year-over-year • Adjusted Diluted EPS: $0.24, up 20% year-over-year • Bookings: $1.1 billion (book-to-bill ratio of 1.3x) • Backlog: $8.3 billion, up 75% year-over-year • Raises 2024 guidance across all metrics • Initiates preliminary 2025 guidance framework ARLINGT ...